Exhibit 4.4
SECURITY AGREEMENT
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This SECURITY AGREEMENT ("Security Agreement") is made this 9th. day
of May 2002, by and between XXXX X. XXXXXXXX AND C. XXXX XXXXXXXX (together,
"Xxxxxxxx"), and VILLAGEEDOCS, a California corporation ("VillageEDOCS").
W I T N E S S E T H:
WHEREAS, Xxxxxxxx has advanced $2,039,245.20 which $2,039,245.20 is
evidenced by certain Unsecured Convertible Promissory Notes that have been
extended, modified, and additionally secured by that certain Promissory Note
Modification Agreement dated May 9, 2002;
WHEREAS, VillageEDOCS desires to induce Xxxxxxxx to provide new debt
financing to satisfy general working capital obligations;
WHEREAS, Xxxxxxxx has offered to provide VillageEDOCS with up to
$610,000 in debt financing during 2002;
WHEREAS, Xxxxxxxx desires to retain its security interest in the
assets of VillageEDOCS including, without limitation, all software, intellectual
property, contracts, equipment, inventory, accounts receivable and general
intangibles (collectively the "Collateral"), to secure payment of past and
future advances;
WHEREAS, Xxxxxxxx has agreed to the extension to October 31, 2005 of
the due dates of Unsecured Convertible Promissory Notes as modified by the
Promissory Note Modification Agreements in the aggregate principal amount of
$2,039,245.20 formerly due between May 31, 2002 and October 31, 2003 in
consideration for the receipt of such security interest; and
WHEREAS, Xxxxxxxx and VillageEDOCS wish to enter into the Security
Agreement to evidence such security interest in the Collateral to secure said
payments and obligations.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the sufficiency and receipt of
which are hereby acknowledged, the parties agree as follows:
1. Recitals. The above recitals are true and correct and are
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incorporated herein by reference.
2. Security Interest. VillageEDOCS hereby agrees that Xxxxxxxx has
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a security interest in all of VillageEDOCS right, title and interest in and to
the following Collateral:
(a) Equipment. In addition to the definition of "Equipment"
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contained in the Uniform Commercial Code (UCC), all
equipment and all other tangible assets of VillageEDOCS of
any kind and description, and wherever located, together
with all parts, accessories and attachments and all
replacements therefor.
(b) Furniture and Fixtures. All furniture and fixtures of
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VillageEDOCS of any kind and description, wherever located,
together will all parts, accessories and attachments and
all replacements therefor.
(c) Inventory. In addition to the definition of "Inventory"
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contained in the UCC, all of VillageEDOCS' inventory and
any agreements for lease or license of same and rentals,
license fees or royalties therefrom, software and general
intangibles (including, but not limited to, goodwill,
patents and trademarks), wherever located.
(d) Accounts. In addition to the definition of "Accounts" in
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the UCC, any and all obligations of any kind at any time
due and/or owing to VillageEDOCS and all
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rights of VillageEDOCS to receive payment or any
consideration (whether classified under the UCC of the
State of California or any other state as accounts,
accounts receivable, contract rights, chattel paper,
general intangibles, or otherwise) including without
limitation, invoices, contract rights, accounts receivable,
general intangibles, chooses-in-action, notes, drafts,
acceptances, instruments and all other debts, obligations
and liabilities in whatever form owing to VillageEDOCS from
any person, firm, governmental authority, corporation or
any other entity, all security therefor, and all
VillageEDOCS' rights to goods sold (whether delivered,
undelivered, in transit or returned).
(e) Trademarks, Etc. All trademarks and service marks now held
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by VillageEDOCS, both those that are registered with the
United States Patent and Trademark Office and any
unregistered marks used by VillageEDOCS in the United
States; and trade dress, including logos and designs, in
connection with which any such marks are used, together
with all registrations regarding such marks and the rights
to renewals thereof, and the goodwill of the business of
VillageEDOCS symbolized by such marks.
(f) Copyrights. All copyrights now held by VillageEDOCS.
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(g) Proprietary Information, Computer Software and Data,
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Proprietary Software Products, Etc. All proprietary
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information, work product, material and trade secrets of
VillageEDOCS with respect to VillageEDOCS' business and all
proprietary computer software programs, including the
source code version thereof, and the information contained
therein and all intellectual property rights with respect
thereto.
(h) Claims, Liens, Insurance, Documents and Data. Any claims of
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VillageEDOCS against third parties for loss or damage to,
or destruction of, any and all of the foregoing, all
guarantees, security and liens for payment of any account
receivable and documents of title, policies, certificates
of insurance, insurance proceeds, securities, chattel
paper, and other documents and instruments evidencing or
pertaining thereto, and all files, correspondence,
computer programs, tapes, disks and related data
processing software transferred by VillageEDOCS, or in
which VillageEDOCS had an interest, which contain
information identifying any one or more of the items
referred to in (a) through (g) above.
(i) Proceeds. (i) any and all proceeds of any insurance,
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indemnity, warranty or guaranty payable to VillageEDOCS
from time to time with respect to any of the Collateral;
(ii) any and all payments, in any form whatsoever, made or
due and payable to VillageEDOCS from time to time in
connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of
the Collateral by any governmental body, authority, bureau
or agency (or any person acting under color of
governmental authority); and (iii) any claim of
VillageEDOCS against third parties for past, present or
future infringement or dilution of any proprietary rights
or intellectual property or for injury to the goodwill
associated with any proprietary rights or intellectual
property under any patent or trademark license with respect
to any of the Collateral.
3. Covenants. VillageEDOCS covenants and agrees that, until payment
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in full of the indebtedness owed by VillageEDOCS to Xxxxxxxx, VillageEDOCS will:
(a) not sell, assign or otherwise dispose of the Collateral
except in the ordinary course of business and provided that nothing in this
Section 4 shall prevent VillageEDOCS from licensing the Collateral with the
prior written consent of Xxxxxxxx, which consent shall not be unreasonably
withheld;
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(b) do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence and all rights and
privileges necessary for the proper conduct of its business, and comply with all
requirements of all applicable laws and all rules, regulations and orders of all
regulatory agencies and authorities having jurisdiction over it;
(c) strictly perform and observe all agreements, warranties,
covenants and conditions of this Security Agreement;
(d) not further encumber the Collateral without the express
written consent of the Xxxxxxxx;
(e) keep the Collateral fully insured, where applicable;
(f) not do anything to impair the value of the Collateral; and
(g) pay all taxes, where applicable, with respect to the
Collateral when due.
4. Inspection of Records. VillageEDOCS shall permit Xxxxxxxx and
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its agents to inspect, examine, and make extracts or copies of VillageEDOCS'
financial records at all reasonable times with prior reasonable advance notice.
VillageEDOCS shall furnish to Xxxxxxxx and its agents any additional information
Xxxxxxxx may reasonably request. VillageEDOCS shall cooperate with Xxxxxxxx and
its agents and honor all reasonable requests of Xxxxxxxx and its agents in
effecting the inspection described above.
5. Cooperation. VillageEDOCS shall execute all documents and do all
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such other acts as Xxxxxxxx may reasonably request in order to perfect Xxxxxxxx'
security interest hereunder, specifically including execution of a Form UCC-1
Financing Statement. Xxxxxxxx shall file a Form UCC-3 termination statement upon
full payment of the indebtedness.
6. Representations and Warranties. VillageEDOCS represents and
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warrants that (i) the execution, delivery and performance of this Security
Agreement has been duly authorized by all necessary corporate actions of
VillageEDOCS; and (ii) it has full power and authority to execute this
Agreement; (iii) it shall not transfer or otherwise dispose of the Collateral
except in the ordinary course of VillageEDOCS' business; and (iv) it shall not
do anything to impair the value of the Collateral or the security interest
granted hereunder.
7. Events of Default. The term "Event of Default" as used herein
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shall mean the occurrence and continuation of any one or more of the following
events:
(a) A default in the payment of any amounts due and payable by
VillageEDOCS to Xxxxxxxx;
(b) Failure of VillageEDOCS to promptly and faithfully pay,
observe and perform when due any of the obligations set forth in this Agreement,
which failure continues for ten (10) days after receipt of written notice
thereof from Xxxxxxxx;
(c) If VillageEDOCS shall:
(i). file a petition for liquidation in bankruptcy; or
(ii). be subject to liquidation pursuant to a petition in
bankruptcy filed against it.
(iii). be in default or receive notice of default under any
other promissory note, evidence of indebtedness or any agreements and such
defaults are not cured by VillageEDOCS within ten (10) days of VillageEDOCS
receiving notice of such default.
8. Remedies. Upon an Event of Default which remains uncured for a
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period of ten (10) days after written notice is received by VillageEDOCS,
Xxxxxxxx shall be granted immediate access and
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shall have a perpetual license to use for no additional consideration the
proprietary computer software programs of VillageEDOCS including the object
code, source code and all maintenance items and enhancements thereof.
Additionally, Xxxxxxxx shall available to it all other rights and remedies at
law, including Uniform Commercial Code as adopted in the State of California or
an equity.
9. Waivers. VillageEDOCS expressly consents that the time for all
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payments owed to Xxxxxxxx may be extended by Xxxxxxxx and further consents that
the Collateral or any part thereof may be released by Xxxxxxxx without in any
way modifying, altering, releasing, affecting or limiting the liability of
VillageEDOCS to Xxxxxxxx.
10. Attorneys' Fees. In the event of a dispute hereunder, the
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prevailing party shall be entitled to all costs, including without limitation,
all attorneys' fees, court costs and costs of appeal, and hourly fees of legal
assistants working under the supervision of an attorney.
11. Miscellaneous.
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(a) This Agreement shall be construed in accordance with the
laws of the State of California.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns.
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IN WITNESS WHEREOF, the parties have hereunto caused this Agreement
to be executed as of the day and year first above written.
VILLAGEEDOCS,
a California corporation
By: /s/ K. Xxxxx Xxxxxx
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Name: K. Xxxxx Xxxxxx
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Title: President and Chief Executive Officer
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XXXXXXXX
/s/ Xxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxx
/s/ C. Xxxx Xxxxxxxx
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C. Xxxx Xxxxxxxx
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