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, Larry J. Hamlin, 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
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