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EXHIBIT 10.39
SECURITY AGREEMENT
This Security Agreement ("Security Agreement") is entered into this
2nd day of December, 1998 between Apexx Technology, Inc. ("Pledgor") , whose
principal place of business is located at 000 X. 00xx Xxxxxx, Xxxxx, Xxxxx
00000, and eSoft, Inc. (the "Secured Party"), whose principal place of business
is located at 0000-X Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000.
1. Pledgor hereby grants to the Secured Party a security interest in
all of Borrower's right, title and interest in and to any of its tangible or
intangible property and assets, whether real, personal or mixed, whether now
owned or existing or hereafter acquired or arising, wherever located,
including, without limitation, all accounts, chattel paper, documents,
contracts, licenses, equipment, fixtures, general intangibles, goods,
instruments, intellectual property rights, inventory and money, together with
all after-acquired property, replacements and substitutions thereof and all
proceeds from any sale thereof (collectively, the "Collateral"). The
intellectual property that is included within the Collateral shall include,
without limitation, the following (collectively, the "Intellectual Property"):
a. All inventions, discoveries, patents, patent disclosures,
copyrights, mask works, know-how, developments, research data,
designs, technology, trade secrets (technical and
non-technical), test procedures, processes, data and
documentation (including any electronic media in which such
materials may be embodied), confidential information,
intellectual and similar intangible property rights whether or
not patentable (or otherwise subject to legally enforceable
restrictions or protections against unauthorized third party
usage), and any and all applications for, and extensions,
divisions and reissuances of, any of the foregoing, and rights
therein; the foregoing expressly including all rights of any
kind and nature, including the copyright, in and to any Software
or Documentation. As used herein: (a) "Software" means all
computer programs, in machinereadable object code and any and
all corresponding source code, and includes, without limitation:
any and all printed listings, file formats, interface or
operating system designs, application programs, structure,
architecture, libraries, tools, functions, subroutines, and all
components, portions or modules thereof, and (b) "Documentation"
means all user manuals, handbooks, on-line materials,
development tools, specifications, and any other written or
machine readable materials relating in any way to the Software,
and includes, without limitation: any and all Software
specifications; programmer's or developer's notes, and
engineering or system design notes; instructions for compiling
or decompiling; and all pseudo-code, algorithms, diagrams or
flow charts whether or not directly incorporated in the
Software. The Software and Documentation shall include, without
limitation, the Software and Documentation set forth in Schedule
1 to this Security Agreement.
b. All trademarks, service marks, trade names or other names,
symbols, devices, trade dress, or other designations or
combinations of such designations that are distinctive of
Pledgor's goods or services and that are used in a manner
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that identifies those goods or services and distinguishes them
from the goods or services of others as may be owned or used by
Pledgor, including without limitation those trademarks and
service marks owned by Pledgor as set forth in registrations or
pending applications in the United States Patent and Trademark
Office, any state of the United States, or any foreign country
(collectively, the "Marks"); the goodwill of the business in
which each of the Marks is used, or that part of the goodwill of
the business connected with the use of and symbolized by each of
such Marks (the "Goodwill"); and, in the case of the Marks for
which an application for registration may have been filed in the
United States as an "Intent to Use" application, if any, under
Section 1(b) of the Xxxxxx Act and in respect of which a
verified statement of use has not yet been filed, that portion
of Pledgor's ongoing and existing business to which each such
Xxxx pertains (the "Business"). The Marks shall include, without
limitation, the Marks set forth in Schedule 2 to this Security
Agreement.
c. All shop rights, licenses, and beneficial interests as Pledgor
may have in and to any third party proprietary intangible
property, including any goodwill pertaining thereto (the
"Beneficial Interests").
d. All rights to renew, use or register any of the Intellectual
Property in any country; and to collect royalties or other
proceeds in respect of any of the Intellectual Property; and all
of Pledgor's claims for damages by reason of past infringement
of any of the Intellectual Property, with the right to xxx for
and collect the same for its own use and benefit and to enforce
and collect any damages or enforce any remedies in respect of
any of the Intellectual Property whether now existing or
hereafter accruing (collectively, the "Related Rights").
2. This Security Agreement is executed by Pledgor to secure
performance of Pledgor's obligations under that certain Secured Promissory Note
dated December 2, 1998 in the principal amount of $500,000 (the "Note")
executed by Pledgor and payable to the order of Secured Party. The obligation
of Pledgor to make all payments under such Note, together with all costs of
collection (if any) are collectively referred to in this Security Agreement as
the "Obligations." The Obligations shall include all extensions, renewals,
rearrangements, or modifications of the Note.
3. Pledgor will pay to Secured Party, on demand, all expenses,
including reasonable attorney's fees and other legal expenses, incurred or paid
by Secured Party in exercising or protecting its interest, rights, and remedies
under this Security Agreement.
4. Pledgor hereby covenants and agrees with Secured Party as follows:
a. As soon as practicable after request therefore, without further
consideration, Pledgor shall execute and deliver, in proper form
for relevant recording or filing, such additional collateral
assignments, consents, memoranda for recording, and other
instruments or documents, and sign such proper oaths or
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affirmations, as Secured Party may reasonably deem necessary or
desirable to vest or confirm in Secured Party its security
interest in any of the Intellectual Property and to facilitate
the effective recordation or establishment of Secured Party's
security interest thereto or validity thereof; and, without
limiting the foregoing obligation, Pledgor agrees that Pledgor
will sign all lawful papers, will make all rightful oaths in
execution thereof, and will generally do everything possible to
aid Secured Party, its successors, assigns and nominees to obtain
and enforce proper protection for its security interest in the
Intellectual Property in all countries, this obligation to be
binding upon Pledgor and upon Pledgor's successors, assigns and
nominees; Pledgor hereby granting to Secured Party an irrevocable
power of attorney on Pledgor's behalf to execute, acknowledge and
deliver any and all such collateral assignments, consents,
memoranda, instruments or documents.
b. Pledgor hereby acknowledges and agrees that all references
herein to "Pledgor" shall include any other person (natural
person or any corporate or other juridical entity) which is an
affiliate of Pledgor or which controls, is controlled by or
under common control with Pledgor.
c. Pledgor hereby represents and warrants that Pledgor has no
knowledge of any claim or any basis for a claim that the
manufacture, use, or sale of products or processes covered by
any of the Intellectual Property, or any other action which
might be taken with respect to any of the Intellectual Property
violates any rights of any third person; and that Pledgor has no
knowledge of any manufacture, use or sale, or of any other
action by any third person which would conflict with or
constitute an infringement of any of the Intellectual Property.
d. At Secured Party's request, Pledgor agrees to enter into an
escrow agreement (the "Escrow Agreement") with Secured Party and
an escrow agent mutually agreed upon between Pledgor and Secured
Party and that provides for the escrow of a current and complete
master, reproducible copy of all the source code of the
Software. Such source code in escrow shall be promptly updated,
from time to time, to reflect all additions, revisions,
modifications and enhancements thereto. Pledgor and Secured
Party shall each pay 50% of all costs and expenses incurred for
establishing and maintaining the escrow. As used herein "source
code" shall mean the human-readable form of the Software
together with all related Documentation, including all comments
and any procedural code such as job control language and
materials useful for design, modification or maintenance (e.g.,
logic designs, flow charts, and principles of operation). The
Escrow Agreement shall provide that upon Pledgor's breach of any
of its Obligations, Secured Party shall have the right to
receive the source code from escrow, and to use the source code
for all purposes whatsoever.
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5. Secured Party will have the power to endorse any instrument
described as a portion of the Collateral and Pledgor hereby grants to Secured
Party a limited power of attorney, deemed coupled with an interest, for the
purposes of endorsing in the name of Pledgor any such instrument or document
constituting Collateral or which may be received in payment for or as proceeds
of the Collateral.
6. Pledgor will not sell or offer to sell or otherwise transfer or
encumber the Collateral without the prior written consent of the Secured Party.
7. Pledgor will keep the Collateral in good order and repair and will
not waste or destroy the Collateral.
8. At the request of the Secured Party, Pledgor will join with the
Secured Party in executing one or more financing statements pursuant to the
Uniform Commercial Code, as enacted in the States of Idaho, Minnesota and
Massachusetts, in form satisfactory to the Secured Party. Pledgor authorizes
Secured Party, without the necessary joinder by Pledgor, to file in all
jurisdictions in which Collateral is or may be located one or more financing
statements covering all or any portion of the Collateral.
9. Pledgor represents, warrants, and agrees that: (a) Pledgor has full
power and authority to execute and deliver this Security Agreement and to
perform its obligations hereunder; (b) Pledgor has observed all corporate
formalities necessary for the execution, delivery, and performance of this
Security Agreement; (c) a duly authorized and empowered officer of Pledgor has
executed this Security Agreement on behalf of Pledgor; (d) the Collateral is
not subject to the interest of any third party except as set forth on Exhibit A
hereto, and Pledgor will defend the Collateral and its proceeds against the
claims and demands of all third parties; and (e) Pledgor agrees to execute and
deliver to Secured Party such powers of attorney, pledge agreements,
endorsements of securities or other instruments or other documents, and to
endorse and deliver to Secured Party such Collateral as may be reasonably
required by Secured Party in order to effectively grant to Secured Party the
security interest in and to the Collateral and to enforce Secured Party's
rights in the same.
10. SECURED PARTY SHALL BE UNDER NO DUTY WHATSOEVER TO MAKE OR GIVE
ANY PRESENTMENT, DEMAND FOR PERFORMANCE, NOTICE OF NONPERFORMANCE, PROTEST,
NOTICE OF PROTEST, NOTICE OF DISHONOR, OR OTHER NOTICE OR DEMAND IN CONNECTION
WITH ANY COLLATERAL, OR TO PRESERVE ANY RIGHTS AGAINST PRIOR PARTIES. Secured
Party shall not be liable for failure to collect or realize upon any or all of
the Collateral, or for any delay in so doing, nor shall Secured Party be under
any duty to take any action whatsoever with regard thereto. Secured Party shall
use reasonable care in the custody and preservation of any Collateral in its
possession but need not take any steps to keep the Collateral identifiable.
Secured Party shall have no duty to comply with any recording, filing, or other
legal requirements necessary to establish or maintain the validity, priority or
enforceability of, or Secured Party's rights in or to, any of the Collateral.
11. Pledgor: (a) waives any right to require Secured Party to proceed
against any person, exhaust any Collateral, or pursue any other remedy in
Secured Party's power; (b) waives any and all notice of acceptance of this
Security Agreement or of creation, modification, renewal, or extension
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of any of the indebtedness that is secured by the Collateral hereunder; and (c)
waives any defense arising by reason of any disability or other defense of
Pledgor or any other person, or by reason of the cessation from any cause
whatsoever of the liability of Pledgor or any other person.
12. Pledgor authorizes Secured Party, without notice or demand and
without any reservation of rights against Pledgor and without affecting its
liability hereunder or on the Obligations, from time to time to: (a)
compromise, settle, or release the obligation of Pledgor with respect to any or
all of the Obligations or Collateral; and (b) take and hold security, other
than the Collateral, for the payment of any or all of the Obligations, and
exchange, enforce, waive, and release any or all of the Collateral or other
security.
13. Secured Party may, in its discretion, sell, assign and deliver all
or any part of the Collateral at public or private sale, without notice or
advertisement, and bid and become purchaser at any public sale. Secured Party
may apply the proceeds of any disposition of Collateral available for
satisfaction of the Obligations and expenses of sale in any order of preference
which Secured Party in its sole discretion chooses. Pledgor shall remain liable
for any deficiency. Upon any sale of any Collateral, Secured Party shall have
the right to deliver to the purchaser thereof all or any portion of the
Collateral, free and clear of any claim or right of Pledgor, or any person
claiming by, through or under Pledgor. The Collateral may be sold separately or
combined with the collateral of other debtors as Secured Party deems necessary
or desirable. Secured Party shall not be obligated to make any sale pursuant to
any notice of sale provided and Secured Party may, without notice or
publication, adjourn any public or private sale or cause such sale to be
adjourned from time to time by written or oral announcement given at the time
and place fixed for such sale and may reconvene such sale, pursuant to such
notice of adjournment, at any time or place designated by Secured Party in such
announcement. Secured Party shall not be required to conduct any sale of any
Collateral pursuant to this Security Agreement and is authorized to proceed
with collection of the Obligations from Debtor by all legal means including,
but not limited to, institution of a lawsuit in a court of competent
jurisdiction for collection of the Obligations. Any sale of any Collateral that
meets the requirements of the Washington Uniform Commercial Code will be deemed
to satisfy the requirements of this Security Agreement.
14. The rights, powers, and remedies of Secured Party hereunder shall
be in addition to all rights, powers, and remedies given by statute or rule of
law. Regardless of whether or not the Uniform Commercial Code is in effect in
the jurisdiction where such rights, powers, and remedies are asserted, Secured
Party shall have the rights, powers and remedies of a secured party under the
Uniform Commercial Code of Colorado, as amended. No forbearance, failure, or
delay by Secured Party in exercising any right, power, or remedy shall be
deemed a waiver thereof or preclude any other or further exercise thereof. No
single or partial exercise of any right, power, or remedy shall preclude any
other or further exercise thereof, or the exercise of any other right, power,
or remedy.
15. Secured Party acknowledges that the Collateral is subject to a
prior lien held by Idaho Independent Bank (the "Bank"), and that all of Secured
Party's rights under this Security Agreement are subordinate to the Bank's
prior liens on the Collateral. Secured Party agrees to execute and deliver such
documents and agreements as the Bank may reasonably request to reflect the
subordination of the liens created by this Agreement to the liens held by the
Bank.
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16. This Security Agreement shall be binding on and enforceable
against Pledgor and its successors, assigns, and legal representatives and
shall inure to the benefit of Secured Party and its successors, assigns, and
legal representatives.
17. This Security Agreement and the obligations of the Pledgor and the
Secured Party hereunder shall be governed by and construed in accordance with
the laws of the State of Colorado. For purposes of any proceeding involving
this Security Agreement or any of the obligations of the Pledgor and the
Secured Party, the Pledgor and the Secured Party hereby submit to the
non-exclusive jurisdiction of the courts of the State of Colorado and of the
United States having jurisdiction in the County of Boulder and State of
Colorado, and agree not to raise and waives any objection to or defense based
upon personal jurisdiction or the venue of any such court or based upon forum
non conveniens. The Pledgor and the Secured Party agree not to bring any action
or other proceedings with respect to this Security Agreement or with respect to
any of its respective obligations hereunder in any other court unless such
courts of the State of Colorado and of the United States determine that they do
not have jurisdiction in the matter.
18. This Security Agreement may not be amended (nor may any of its
terms be waived) except in writing duly signed by Secured Party and by Pledgor.
If any provision of this Security Agreement is rendered or declared illegal or
unenforceable by reason of any existing or subsequently enacted legislation or
by a decree of last resort, Pledgor and Secured Party shall promptly meet and
negotiate substitute provisions for those rendered illegal or unenforceable,
but all of the remaining provisions shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Security Agreement
as of the 2nd day of December, 1998.
PLEDGOR
APEXX TECHNOLOGY, INC.
By: /s/ Xxx Xxxxxxxxxxxxx
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Name: Xxx Xxxxxxxxxxxxx
Title: President and Chief Executive Officer
SECURED PARTY
eSOFT, INC.
By: /s/ Xxxxxxx Xxxx
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Name: Xxxxxxx Xxxx
Title: President and Chief Executive Officer
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