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COMMERCIAL SECURITY AGREEMENT
This Commercial Security Agreement
(“Agreement”) is made as of August 21, 2007, by
JONES SODA CO . , a Washington corporation
(“Borrower”), for the benefit of KEYBANK NATIONAL
ASSOCIATION (“Lender”).
RECITALS
A. Borrower has received a revolving loan (the
“Loan”) from Lender in the principal amount of
$15,000,000.00 (the “Indebtedness”) evidenced by a
Revolving Note (the “Note”) of even date executed by
Borrower to the order of Lender.
B. As
a condition of granting the Loan, Lender has required that Borrower
grant to Lender a security interest in the Collateral to secure
Borrower’s repayment of the Indebtedness and Borrower’s
obligations to Lender under the Revolving Note and other loan
documents.
C. This Agreement is given in connection with a Loan Agreement
of even date made by Borrower and Lender (the “Loan
Agreement”). All capitalized terms not otherwise defined in
this Agreement shall have the definitions given them in the Loan
Agreement.
AGREEMENT
1.
Grant of Security Interest . For valuable consideration,
Borrower as a debtor and grantor hereby grants to Lender a security
interest on the Collateral to secure Borrower’s repayment of
the Indebtedness and Borrower’s obligations to Lender under
the Loan Documents, and agrees that Lender shall have the rights
stated in this Agreement with respect to the Collateral, in
addition to all other rights which Lender may have by law.
2.
Definitions . The following words shall have the following
meanings when used in this Agreement:
•
Agreement . “Agreement” means this
Commercial Security Agreement, as this Commercial Security
Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Commercial
Security Agreement from time to time.
•
Borrower . “Borrower” means JONES SODA
CO.
•
Collateral . “Collateral” means the
following described assets and property of Borrower, whether now
owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located:
All assets and property of
Borrower, whether now existing or hereafter arising, whether now
owned by Borrower or hereafter acquired by Borrower, and/or whether
now or hereafter subject to any rights in any such assets and
property, such assets and property to include, without limitation,
all inventory, equipment, accounts, chattel paper, instruments
(including, without limitation, all promissory notes),
letter-of-credit rights, letters of credit, documents, deposit
accounts, investment property, money, other rights to payment and
performance, and general intangibles (including, without
limitation, all software and all payment intangibles); all patents,
trademarks, copyrights and intellectual property rights; all
insurance refunds relating to the foregoing assets and property;
all good will relating to the foregoing assets and property and
Borrower’s business; and all supporting obligations relating
to the foregoing assets and property; all whether now existing or
hereafter arising, whether now owned or hereafter acquired or
whether now or hereafter subject to any rights in the foregoing
assets and property.
In addition, the word
“Collateral” includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter
existing, and wherever located:
(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to all and replacements of and
substitutions for any of the assets and property described
above.
(b) All products and produce of any of the assets and property
described in this Collateral section.
(c) All accounts, general intangibles, instruments, rents,
monies, payments, and all other rights, arising out of a sale,
lease, or other disposition of any of the assets and property
described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss or other disposition of any of the assets and
property described in this Collateral section.
(e) All records and data relating to any of the assets and
property described in this Collateral section, whether in the form
of a writing, photograph, microfilm, microfiche, or electronic
media, together with all of Borrower’s right, title, and
interest in and to all computer software required to utilize,
create, maintain, and process any such records or data on
electronic media.
•
Event of Default . “Event of Default”
means any of the Events of Default set forth below in the section
titled “Events of Default.”
•
Borrower . “Borrower” means JONES SODA
CO.
•
Guarantor . “Guarantor” means and
includes without limitation each and all of the guarantors,
sureties, and accommodation parties in connection with the
Indebtedness.
•
Income and Proceeds . “Income and
Proceeds” mean all present and future income, proceeds,
earnings, increases, and substitutions from or for the Collateral
of every kind and nature, including without limitation all
payments, interest, profits, distributions, benefits, rights,
options, warrants, dividends, stock dividends, stock splits, stock
rights, regulatory dividends, distributions, subscriptions, monies,
claims for money due and to become due, proceeds of any insurance
on the Collateral, shares of stock of different par value or no par
value issued in substitution or exchange for shares included in the
Collateral, whether voluntary or involuntary, by agreement or by
operation of law, and all other property Borrower is entitled to
receive on account of such Collateral, including accounts, contract
rights, documents, instruments, chattel paper, and general
intangibles.
•
Indebtedness . “Indebtedness” means the
indebtedness evidenced by the Note, including all principal and
interest, together with all other indebtedness and costs and
expenses for which Borrower is responsible under this Agreement or
under any of the Loan Documents. In addition, the word
“Indebtedness” includes all other obligations, debts
and liabilities, plus interest thereon, of Borrower to Lender, as
well as all claims by Lender against Borrower, whether existing now
or later; whether they are voluntary or involuntary, due or not
due, direct or indirect, absolute or contingent, liquidated or
unliquidated; whether Borrower may be liable individually or
jointly with others; whether Borrower may be obligated as
guarantor, surety, accommodation party or otherwise; whether
recovery upon such Indebtedness may be or hereafter may become
barred by any statute of limitations; and whether such indebtedness
may be or hereafter may become otherwise unenforceable.
•
Lender . “Lender” means KEYBANK NATIONAL
ASSOCIATION, its successors and assigns.
•
Loan Documents . “Loan Documents” means
this Agreement, the Note, the Loan Agreement, all related
documents, and all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments,
agreements and documents, whether now or hereafter existing,
executed in connection with the Note.
•
Note . “Note” means the Revolving Note of
even date, in the principal amount of $15,000,000.00 executed by
Borrower to the order of Lender, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of
and substitutions for the Note.
•
Obligor . “Obligor” means and includes,
without limitation, any and all persons or entities obligated to
pay money or to perform some other act under the Collateral.
3.
Borrower’s Waivers and Responsibilities . Except as
otherwise required under this Agreement or by applicable law,
(a) Borrower agrees that Lender need not tell Borrower about
any action or inaction Lender takes in connection with this
Agreement; (b) Borrower assumes the responsibility for being
and keeping informed about the Collateral; and (c) Borrower
waives any defenses that may arise because of any action or
inaction of Lender, including, without limitation, any failure of
Lender to realize upon the Collateral or any delay by Lender in
realizing upon the Collateral; and Borrower agrees to remain liable
under the Indebtedness no matter what action Lender takes or fails
to take under this Agreement.
4.
Right of Setoff . Borrower hereby grants Lender a
contractual possessory security interest in and hereby assigns,
conveys, delivers, pledges, and transfers all of Borrower’s
right, title and interest in and to Borrower’s accounts with
Lender (whether checking, savings, or some other account),
including all accounts held jointly with someone else and all
accounts Borrower may open in the future, excluding however all
IRA, Keogh, and trust accounts. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all
indebtedness against any and all such accounts, and, at
Lender’s option, to administratively freeze all such accounts
to allow Lender to protect Lender’s charge and setoff rights
provided in this section.
5.
Borrower’s Representations and Warranties . Borrower
warrants that: (a) this Agreement is executed at
Borrower’s request and not at the request of Lender, and
(b) Borrower has the full right, power and authority to enter
into this Agreement and to pledge the Collateral to Lender.
6.
Borrower’s Waivers . Borrower waives all requirements
of presentment, protest, demand, and notice of dishonor on
non-payment to Borrower, or any other party to the Indebtedness or
the Collateral.
7.
Obligations of Borrower . Borrower warrants and covenants to
Lender as follows:
7.1
Organization . Borrower is a corporation which is duly
organized, validly existing, and in good standing under the laws of
the State of Washington. Borrower has its chief executive office at
234 Ninth Avenue North, Seattle, Washington 98109. Borrower will
notify Lender of any change in the state of its incorporation
and/or the location of Borrower’s chief executive office.
7.2
Authorization . The execution, delivery, and performance of
this Agreement by Borrower have been duly authorized by all
necessary action by Borrower and do not conflict with, result in a
violation of, or constitute a default under (a) any provision
of its articles of incorporation or organization, or bylaws, or any
agreement or other instrument binding upon Borrower or (b) any
law, governmental regulation, court decree, or order applicable to
Borrower.
7.3
Perfection of Security Interest . Borrower agrees to file such
financing statements and to take whatever other actions are
requested by Lender to perfect and continue Lender’s security
interest in the Collateral. In addition, Borrower agrees that
Lender may file any financing statement required to perfect
Lender’s security interest in the Collateral. Upon request of
Lender, Borrower will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Borrower
will note Lender’s interest upon any and chattel paper if not
delivered to Lender for possession by Lender. Borrower hereby
appoints Lender as its irrevocable attorney-in-fact for the purpose
of executing or filing any documents necessary to perfect or to
continue the security interest granted in this Agreement. Lender
may at any time, and without further authorization from Borrower,
file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement.
Borrower will reimburse Lender for all expenses for the perfection
and the continuation of the perfection of Lender’s security
interest in the Collateral. Borrower promptly will notify Lender of
any change in Borrower’s name including any change to the
assumed business names of Borrower.
7.4 No
Violation . The execution and delivery of this Agreement will
not violate any law or agreement governing Borrower or to which
Borrower is a party, and its certificate or articles of
incorporation and bylaws do not prohibit any terms or condition of
this Agreement.
7.5
Enforceability of Collateral . To the extent the Collateral
consists of accounts, contract rights, chattel paper, or general
intangibles, the Collateral is enforceable in accordance with its
terms, is genuine, and complies with the applicable laws concerning
form, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority
and capacity to contract and are in fact obligated as they appear
to be on the Collateral. At the time any account becomes subject to
a security interest in favor of Lender, the account shall be a good
and valid account representing an undisputed, bona fide
Indebtedness incurred by the account debtor, for merchandise held
subject to delivery instructions or theretofore shipped or
delivered pursuant to a contract of sale, or for services
theretofore performed by Borrower with or for the account debtor;
there shall be no setoffs or counterclaims against any such
account; and no agreement under which any deductions or discounts
may be claimed shall have been made with the account debtor except
those disclosed to Lender in writing.
7.6
Location of Collateral . Borrower, upon request of Lender, will
deliver to Lender in form satisfactory to Lender a schedule of real
properties and Collateral locations relating to Borrower’s
operations, including without limitation the following:
(a) all real property owned or being purchased by Borrower;
(b) all real property being rented or leased by Borrower;
(c) all storage facilities owned, rented, leased, or being
used by Borrower; and (d) all other properties where
Collateral is or may be located. Except in the ordinary course of
its business, Borrower shall not remove the Collateral from its
existing locations without the prior written consent of Lender,
which shall not be unreasonably withheld.
7.7
Removal of Collateral . Borrower shall keep the Collateral (or
to the extent the Collateral consists of intangible property such
as accounts, the records concerning the Collateral) at
Borrower’s address shown above, or at such other locations as
are reasonably acceptable to Lender. Except in the ordinary course
of its business, including the sales of inventory, Borrower shall
not remove the Collateral from its existing locations without the
prior written consent of Lender, which shall not be unreasonably
withheld. To the extent that the Collateral consists of vehicles,
or other titled property, Borrower shall not take or permit any
action which would require application for certificates of title
for the vehicles outside the State of Washington, without the prior
written consent of Lender, which shall not be unreasonably
withheld.
7.8
Transactions Involving Collateral . Except for inventory sold
or accounts collected in the ordinary course of Borrower’s
business, Borrower shall not sell, offer to sell, or otherwise
transfer or dispose of the Collateral. While Borrower is not in
default under this Agreement, Borrower may sell inventory, but only
in the ordinary course of its business and only to buyers who
qualify as a buyer in the ordinary course of business. A sale in
the ordinary course of Borrower’s business does not include
any bulk sale. Borrower shall not pledge, mortgage, encumber or
otherwise permit the Collateral to be subject to any lien, security
interest, encumbrance, or charge, other than the security interest
provided for in this Agreement, without the prior written consent
of Lender, which shall not be unreasonably withheld. This includes
security interests even if junior in right to the security
interests granted under this Agreement. Unless waived by Lender,
all proceeds from any disposition of the Collateral (for whatever
reason) shall be held in trust for Lender and shall not be
commingled with any other funds; provided however, this requirement
shall not constitute consent by Lender to any sale or other
disposition. Upon receipt, Borrower shall immediately deliver any
such proceeds to Lender.
7.9
Title . Borrower represents and warrants to Lender that it
holds good and marketable title to the Collateral, free and clear
of all liens and encumbrances except for the lien of this
Agreement. No financing statement covering any of the Collateral is
on file in any public office other than those which reflect the
security interest created by this Agreement or to which Lender has
specifically consented. Borrower shall defend Lender’s rights
in the Collateral against the claims and demands of all other
persons.
7.10
Collateral Schedules and Locations . As often as Lender shall
require, and insofar as the Collateral consists of accounts and
general intangibles, Borrower shall deliver to Lender schedules of
such Collateral, including such information as Lender may require,
including without limitation names and addresses of account debtors
and agings of accounts and general intangibles. Insofar as the
Collateral consists of inventory, Borrower shall deliver to Lender,
as often as Lender shall require, such lists, descriptions, and
designations of such Collateral as Lender may require to identify
the nature, extent, and location of such Collateral. Such
information shall be submitted for Borrower and each of its
subsidiaries or related companies.
7.11
Maintenance and Inspection of Collateral . Borrower shall
maintain all tangible Collateral in good condition and repair.
Borrower will not commit or permit damage to or destruction of the
Collateral or any part of the Collateral. Lender and its designated
representatives and agents shall have the right at all reasonable
times to examine, inspect, and audit the Collateral wherever
located. Borrower shall immediately notify Lender of all cases
involving the return, rejection, repossession, loss or damage of or
to any Collateral; of any request for credit or adjustment or of
any other dispute arising with respect to the Collateral; and
generally of all happenings and events affecting the Collateral or
the value or the amount of the Collateral.
7.12
Taxes, Assessments and Liens . Borrower will pay when due all
taxes, assessments and liens upon the Collateral, its use or
operation, upon this Agreement, upon any promissory note or notes
evidencing the Indebtedness, or upon any of the other Loan
Documents. Borrower may withhold any such payment or may elect to
contest any lien if Borrower is in good faith conducting an
appropriate proceeding to contest the obligation to pay and so long
as Lender’s interest in the Collateral is not jeopardized in
Lender’s sole opinion. If the Collateral is subjected to a
lien which is not dis
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