Exhibit 10.19
SECURITY AGREEMENT
This Security Agreement (this "Agreement") is made and entered
into effective as of September 30, 1996 (the "Effective Date")
by and between Xxxx X. Xxxxxx ("Borrower") and Digital Link
Corporation, a California corporation ("Lender").
RECITALS
A. Borrower has borrowed the principal amount of
$250,000.00 from Lender pursuant to the terms of a certain
Secured Promissory Note of Borrower to Lender dated of even
date herewith (the "Note").
B. The parties have agreed that Borrower's
obligations under the Note will be secured by Borrower's grant
to Lender of a security interest in and to certain collateral,
pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of loans made or to
be made by Lender under the Note, the parties' agreements
herein, and for other good and valuable consideration, the
parties hereby agree as follows:
1. Security. The payment and performance of
Borrower's obligations under the Note (hereinafter collectively
referred to as the "Obligations") will at all times be secured
as follows:
(a) Grant of Security Interest. As security
for the due performance and payment of the Obligations, Lender
hereby grants to Lender a security interest in the "Collateral"
as defined in Section 1(b).
(b) Collateral Defined. As used in this
Agreement, the term "Collateral" means, collectively, the
assets described in Exhibit A attached hereto and all proceeds
thereof. Borrower shall deposit the Collateral with Lender and
Lender shall keep the Collateral at Lender's principal place of
business for the term of this Agreement.
(c) Financing Statements. So long as Borrower
is indebted to Lender under the Note, Borrower will promptly
execute and deliver to Lender such assignments, notices,
financing statements, or other documents and papers as Lender
may reasonably require in order to perfect and maintain the
security interest in the Collateral granted to Lender hereby
and to give any third party notice of Lender's interest in the
Collateral. Borrower will pay to Lender all expenses incurred
by Lender in filing such assignments, notices, financing
statements or other documents or papers (and any continuation
statements or amendments thereto). Upon the full and final
discharge of all of Borrower's Obligations, Lender will execute
and deliver such documents as may be reasonably necessary and
requested by Borrower to release the Collateral from the
security interest granted to Lender in this Agreement.
2. Representations and Warranties of Borrower.
Borrower represents and warrants to Lender that:
(a) Authority. Borrower has all right, power
and authority necessary to make, enter into and perform its
obligations under this Agreement and to grant Lender the
security interest in the Collateral granted in Section 1 above,
without the need for the consent or approval of any other
person or entity. Borrower has taken all necessary action to
make this Agreement the legal, valid, binding and enforceable
obligation of Borrower that it purports to be.
(b) No Legal Obstacle to Agreement. To the
best of Borrower's knowledge, neither the execution and
delivery of this Agreement nor the consummation of any
transaction contemplated hereby, nor the fulfillment of the
terms of this Agreement or of any other agreement or instrument
referred to herein, has constituted or resulted in, or will
constitute or result in, a breach of the provisions of any
instrument, contract or agreement to which Borrower is a party
or by which Borrower and/or the Collateral is bound, or the
violation of any law, judgment, decree or governmental or
administrative order, rule or regulation applicable to
Borrower, or has resulted in or will result in the creation of
any lien or claim upon any of the Collateral. No consent of
any other person (including without limitation any creditor of
Borrower) is required in connection with the execution,
delivery, performance, validity or enforceability of this
Agreement.
(c) Title; No Liens or Claims in Collateral.
Borrower owns all right, title and interest in and to the
Collateral and no other person or entity has any right, title
or interest in or to the Collateral, except for statutory liens
for the payment of current taxes that are not yet delinquent.
All of the Collateral is (and until the Note has been paid in
full and all the Obligations are fully satisfied will be) free
and clear of all liens, security interests, mortgages, claims,
rights, encumbrances and restrictions of any kind except for
statutory tax liens and the security interest granted to Lender
under this Agreement.
(d) No Bankruptcy. Borrower is not subject to
any bankruptcy case or insolvency proceedings before any court
in any jurisdiction. In the ninety (90) days preceding the
effective date hereof, Borrower has not received any threat
from any third party to subject Borrower to any involuntary
bankruptcy or insolvency proceeding.
3. Covenants of Borrower. Borrower hereby
covenants and agrees with Lender as follows:
(a) Taxes. Borrower will pay all taxes due and
owing by Borrower at such time as they become due. Borrower
will keep the Collateral in good condition and repair
continuously for so long as Borrower has Obligations to Lender
under the Note.
(b) Maintenance of Records. Borrower will keep
and maintain at its own cost and expense satisfactory and
complete records of the Collateral belonging to it. For
Lender's further security, Lender will have a security interest
in all of the books and records of Borrower pertaining to the
Collateral.
(c) Notice to Account Debtors. Upon the
request of Lender at any time after the occurrence and during
the continuance of an Event of Default (as defined below),
Borrower shall notify account debtors on all Borrower's
accounts that such accounts have been assigned to Lender and
that payments in respect thereof shall be made directly to
Lender.
(d) Moving of Collateral. Borrower will not
move or relocate any or all of the Collateral that remains
owned by Borrower to any location outside the State of California
without Lender's prior written consent, which may be withheld
in Lender's sole discretion. Any notice provided by Borrower
relating to the movement of Collateral shall indicate in detail
the description of the Collateral to be moved or relocated and
the location(s) and address(es) to which such Collateral is to
be moved.
(e) Sale of Collateral. Borrower will not,
without Lender's prior written consent, which may be withheld
in Lender's sole discretion: (i) sell, lease, assign, transfer
or otherwise dispose of the Collateral, any part thereof or any
interest therein, or any of Borrower's rights therein, to any
person, entity or party other than Lender.
4. Lender' Rights and Remedies Upon Event of
Default.
(a) General Remedies. In the event of an
occurrence of any Event of Default (as that term is defined in
the Note, in addition to exercising any other rights or
remedies Lender may have under the Note, at law or in equity,
or pursuant to the provisions of the California Commercial
Code, Lender may, at its option, and without demand first made,
exercise any one or all of the following rights and remedies:
(i) collect the Collateral and its proceeds; (ii) take
possession of the Collateral wherever it may be found, using
all reasonable means to do so, or require Borrower to assemble
the Collateral and make it available to Lender at a place
designated by Lender which is reasonably convenient to
Borrower; (iii) proceed with the foreclosure of the security
interest in the Collateral granted herein and the sale or
endorsement and collection of the proceeds of the Collateral in
any manner permitted by law or provided for herein; (iv) sell,
lease or otherwise dispose of the Collateral at public or
private sale, with or without having the Collateral at the
place of sale; (v) institute a suit or other action against
Borrower for recovery on the Note; (vi) exercise any rights and
remedies of a secured party under the California Commercial
Code; and/or (vii) offset, against any payment due from
Borrower to Lender, the whole or any part of any indebtedness
of Lender to Borrower.
(b) No Election of Remedies. The election by
Lender of any right or remedy will not prevent Lender from
exercising any other right or remedy against Borrower.
(c) Proceeds. If an Event of Default occurs,
all proceeds and payments with respect to the Collateral will
be retained by Lender (or if received by Borrower will be held
in trust and will be forthwith delivered by Borrower to Lender
in the original form received, endorsed in blank) and held by
Lender as part of the Collateral or applied by Lender to the
payment of the Obligations.
(d) Sales of Collateral. Any item of
Collateral may be sold for cash or other value at public or
private sale or other disposition and the proceeds thereof
collected by or for Lender. Borrower agrees to promptly
execute and deliver, or promptly cause to be executed and
delivered, such instruments, documents, assignments, waivers,
certificates and affidavits and supply or cause to be supplied
such further information and take such further action as Lender
may require in connection with any such sale or disposition.
Lender will have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in Borrower,
which right or equity is hereby waived or released. If any
notice of a proposed sale, lease, license or
other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least
ten (10) days before such sale, lease, license or other
disposition. Lender agrees to give Borrower ten (10) days
prior written notice of any sale, lease, license or other
disposition of Collateral (or any part thereof) by Lender.
(e) Application of Proceeds. The proceeds of
all sales and collections in respect of the Collateral, the
application of which is not otherwise specifically herein
provided for, will be applied as follows: (i) first, to the
payment of the costs and expenses of such sale or sales and
collections and the attorneys' fees and out-of-pocket expenses
incurred by Lender relating to costs of collection; (ii)
second, any surplus then remaining will be applied first, to
the payment of all unpaid interest accrued under the Note, and
then to the payment of unpaid principal under the Note; and
(iii) third, any surplus then remaining will be paid to
Borrower.
5. Notices. Any notice required or permitted
hereunder will be given in writing and will be deemed
effectively given upon personal delivery, three days after
deposit in the United States mail by first class mail, one (1)
business day after its deposit with any express courier
(prepaid), or one (1) business day after transmission by
telecopier, in each case addressed to the other party at such
party's address (or facsimile number, in the case of
transmission by telecopier) as shown below its signature to
this Agreement, or to such other address as such party may
designate in writing from time to time to the other party.
6. Jurisdiction; Venue. Borrower, by its execution
hereof hereby, irrevocably submits to the in personam
jurisdiction of the state courts of the State of California and
of the United States District Court for the Northern District
of California that are located in Santa Xxxxx County,
California, for the purpose of any suit, action or other
proceeding arising out of or based upon this Agreement.
7. Termination. When all Obligations have been
paid and performed in full and discharged, this Agreement and the
security interest granted to Lender under this Agreement will
terminate.
8. Amendments and Waivers. No amendment or
modification of this Agreement may be made or be effective
unless and until it is set forth in writing and signed by all
parties hereto. No waiver of any right under this Agreement
will be effective unless expressly set forth in a writing
signed by each party against whom such waiver is asserted. No
course of dealing between the parties will operate as a waiver
of any party's rights under this Agreement. A waiver on any
one occasion will not be construed as a bar to or waiver of any
right or remedy on any future occasion. Borrower acknowledges
that the giving by Lender of any notice or information to
Borrower, or the securing of any consent by Borrower, not
required by the express terms hereof to be given or secured,
will not by implication constitute an amendment to or waiver or
modification of any provision hereof, or impose upon Lender any
duty to give any such notice or information or to secure any
such consent on any future occasion.
9. Attorneys' Fees. If any party hereto commences
or maintains any action at law or in equity (including
counterclaims or cross-complaints) against the other party
hereto by reason of the breach or claimed breach of any term or
provision of this Agreement, then the prevailing party in said
action will be entitled to recover its reasonable attorney's fees
and court costs incurred therein.
10. Successors and Assigns. The provisions of this
Agreement will inure to the benefit of, and be binding on, each
party's respective heirs, successors and assigns.
11. Miscellaneous. The invalidity or
unenforceability of any term or provision of this Agreement
will not affect the validity or enforceability of any other
term or provision hereof. The headings in this Agreement are
for convenience of reference only and will not alter or
otherwise affect the meaning of this Agreement. This Agreement
and the Note and the exhibits thereto, together constitute the
entire agreement and understanding of the parties regarding the
subject matter hereof and supersede any and all prior
understandings and agreements between the parties with respect
to such subject matter.
12. Governing Law. This Agreement will be governed
by and construed exclusively in accordance with the internal
laws of the State of California as applied to agreements
between residents thereof and to be performed entirely within
such State, without reference to that body of law relating to
conflict of laws or choice of law.
13. Execution in Counterparts. This Agreement may
be executed in any number of counterparts, which together will
constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered as of the Effective Date.
BORROWER: LENDER:
\s\ Xxxx X. Xxxxxx \s\ Xxxxxxx X. Xxxxxxxxxxx
Xxxx X. Xxxxxx Xxxxxxx X. Xxxxxxxxxxx
Address: 00000 Xxxxx Xxxx Title: Chief Financial Officer
Xxxxxxxx, XX 00000 Address: 000 Xxxxxxxx Xxxxx
Xxx Xx. Xxxxxxxxx, XX 00000
Fax No.: (000) 000-0000
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EXHIBIT A
DESCRIPTION OF COLLATERAL
Option granted to Xxxx X. Xxxxxx to purchase 370,000 shares of
Common Stock of Digital Link Corporation and shares of Common Stock
issuable upon exercise of such option.
