Exhibit
10.4
SECURITY
AGREEMENT
(Intellectual
Property)
This Security Agreement
(the “Security Agreement”) is made between Sielox, LLC,
a Delaware limited liability company (“Borrower”), and
Summit Financial Resources, L.P., a Hawaii limited partnership
(“Lender”), pursuant to a Loan and Security Agreement
between Lender and Borrower dated August 17, 2009 (the “Loan
Agreement”).
For good and valuable
consideration, receipt of which is hereby acknowledged, Borrower
and Lender hereby agree as follows:
1.
Definitions . Except as otherwise provided
herein, terms defined in the Loan Agreement shall have the same
meanings when used herein. Terms defined in the singular
shall have the same meaning when used in the plural and vice versa.
Terms defined in the Uniform Commercial Code which are used
herein shall have the meanings set forth in the Uniform Commercial
Code, except as expressly defined otherwise. As used herein,
the term:
“Collateral”
means the collateral described in Section 2, Grant of
Security Intrerest .
“Default
Rate” means the default interest rate provided in the
Promissory Notes.
“Intellectual
Property” shall have the meaning set forth in Section 2,
Grant of Security Intrerest .
“Liquidation
Costs” means the reasonable costs and out of pocket expenses
incurred by Lender in obtaining possession of any Collateral, in
storage and preparation for sale, lease or other disposition of any
Collateral, in the sale, lease, or other disposition of any or all
of the Collateral, and/or otherwise incurred in foreclosing on any
of the Collateral, including, without limitation, (a) reasonable
attorneys fees and legal expenses, (b) transportation and storage
costs, (c) advertising costs, (d) sale commissions, (e) sales tax
and license fees, (f) costs for improving or repairing any of the
Collateral, and (g) costs for preservation and protection of any of
the Collateral.
“Patents”
shall have the meaning set forth in Section 2, Grant of
Security Intrerest .
“Permitted
Encumbrances” means liens for taxes and assessments not yet
due and payable or, if due and payable, those being contested in
good faith by appropriate proceedings and for which appropriate
reserves are maintained, security interests and liens created by
the Loan Documents, and security interests and liens authorized in
writing by Lender.
“Trade
Secrets” shall have the meaning set forth in Section 2,
Grant of Security Intrerest .
“Trademarks”
shall have the meaning set forth in Section 2, Grant of
Security Intrerest .
“Uniform
Commercial Code” means the Uniform Commercial Code as adopted
now or in the future in the State of Utah.
2.
Grant of Security
Interest .
a.
Patents
. Borrower hereby
grants to Lender a security interest in all right, title and
interest of Borrower in and to the patent applications and patents
listed on the Schedule of Patents hereto, which is incorporated
herein by reference, including, without limitation, all proceeds
thereof (such as, by way of example, license royalties and proceeds
of infringement suits), the right to sue for past, present and
future infringements, all rights corresponding thereto throughout
the world, and all reissues, divisions, continuations, renewals,
extensions, and continuations-in-part thereof (collectively, the
“Patents”).
b.
Trademarks
. Borrower hereby
grants to Lender a security interest in all right, title and
interest of Borrower in and to the trademark applications and
trademarks listed on the Schedule of Trademarks hereto, which is
incorporated herein by reference, including, without limitation,
all renewals thereof, all proceeds thereof (such as, by way of
example, license royalties and proceeds of infringement suits), the
right to sue for past, present and future infringements, and all
rights corresponding thereto throughout the world (collectively,
the “Trademarks”), and the good will of the business to
which each of the Trademarks relates.
c.
Trade
Secrets .
Borrower hereby grants to Lender a security interest in all
of Borrower’s trade secrets and other proprietary
information, now existing or created in the future, and all
proceeds thereof (collectively, the “Trade
Secrets”).
d.
Intellectual
Property .
Borrower hereby grants to Lender a security interest in all
general intangibles of Borrower, presently existing or hereafter
created, including general intangibles as defined in the Uniform
Commercial Code, trademarks, service marks, business names, and
goodwill relating thereto, copyrights (including, without
limitation, copyrights for computer programs), whether or not
published, unpatented inventions (whether or not patentable),
patents, patent applications, all internet domain names and
addresses, license agreements relating to any of the foregoing and
all royalties and other income therefrom, books, records, computer
tapes, disks and drives, flow diagrams, specification sheets,
source codes, object codes, and all other physical manifestations
of the foregoing, the right to sue for all past, present and future
infringements of the foregoing, any and all claims for damages
relating thereto, all rents, profits and issues thereof, and all
proceeds thereof (collectively, the “Intellectual
Property”).
The Patents,
Trademarks, Trade Secrets, and Intellectual Property are
collectively referred to herein as the
“Collateral”.
Borrower and Lender
acknowledge their mutual intentions that the security interests
contemplated herein are given as a contemporaneous exchange for new
value to Borrower, regardless of when advances to Borrower are
actually made or when the Collateral is created or
acquired.
3.
Debts
Secured .
The security interest granted by this Security Agreement
shall secure all of Borrower’s present and future debts,
obligations, and liabilities of whatever nature to Lender,
including, without limitation, (a) the Promissory Note (Accounts
Receivable Financing) of Borrower in favor of Lender dated August
17, 2009, in the original principal amount of one million five
hundred thousand dollars ($1,500,0000), and all renewals,
extensions, modifications and replacements thereof (including any
which increase the original principal amount), (b) the Promissory
Note (Inventory Financing) of Borrower in favor of Lender dated
August 17, 2009, in the original principal amount of five hundred
thousand dollars ($500,0000), and all renewals, extensions,
modifications and replacements thereof (including any which
increase the original principal amount), (c) all obligations of
Borrower arising from or relating to the Loan Documents, including,
without limitation, this Security Agreement, (d) advances of
the same kind and quality or relating to this transaction, and (e)
transactions singed by Borrower in which the documents evidencing
the indebtedness refer to this grant of security interest as
providing security therefor.
Borrower and Lender
expressly acknowledge their mutual intent that the security
interests created by this Security Agreement secure any and all
present and future debts, obligations, and liabilities of Borrower
to Lender without any limitation whatsoever.
4.
Location of Borrower
and Collateral . Borrower represents and
warrants that:
a.
Borrower is a limited
liability company organized under the laws of the State of
Delaware.
b.
The complete and exact
name of Borrower is Sielox, LLC.
c.
The organizational
identification number, if any, assigned to Borrower by
Borrower’s state of organization is 4027800.
d.
During the five (5)
years preceding the date of this Security Agreement:
(i)
Borrower has not been
known by nor used any legal, fictitious or trade name;
(ii)
Borrower has not
changed its name in any respect;
(iii)
Borrower has not been
the surviving entity of a merger or consolidation;
(iv)
Borrower has not
acquired all or substantially all of the assets of any person or
entity.
2
e.
Borrower’s chief
executive office is located at 170 East Ninth Avenue, Runnemede,
New Jersey 08078.
f.
During the five (5)
years preceding the date of this Security Agreement, there has not
been any change in any of the above locations.
Borrower agrees that it
will not change its state of organization, any of the above
locations or create any new locations for such matters without
giving Lender at least thirty (30) days prior written notice
thereof.
5.
Representations and
Warranties Concerning Collateral . Borrower represents and
warrants that:
a.
Borrower is the sole
owner of the Collateral.
b.
The Collateral is not
subject to any license, security interest, lien, assignment, or
other encumbrance of any nature whatsoever except for nonexclusive
licenses granted in the ordinary course of business and Permitted
Encumbrances.
c.
All information set
forth in the Schedules attached hereto is correct, accurate, and
complete.
d.
Each of the Patents is
valid and enforceable. No claim has been made that the use of
any of the Patents violates or may violate the rights of any person
or entity. Borrower has used proper statutory notice in
connection with all uses of the Patents.
e.
Each of the Trademarks
is valid and enforceable. No claim has been made that the use
of any of the Trademarks violates or may violate the rights of any
person or entity. Borrower has used proper statutory notice
in connection with all uses of the Trademarks. Borrower has
used consistent standards of quality in the manufacture of products
and in providing services sold under the Trademarks.
f.
Except as set forth on
the attached Schedule of Patents, and Schedule of Trademarks,
Borrower has no right, title, or interest in, or license to use,
any patents, patent applications, unpatented inventions,
trademarks, or copyrights which are material to the operation and
conduct of Borrower’s business as presently operated and
conducted and as anticipated to be operated and conducted, except
that Borrower has the rights to use the patent related to the
Performa and Mirage access control cards.
6.
Covenants Concerning
Collateral .
Borrower covenants that:
a.
Borrower will keep the
Collateral free and clear of any and all security interests, liens,
assignments or other encumbrances and licenses, except nonexclusive
licenses granted in the ordinary course of business and Permitted
Encumbrances.
b.
Borrower hereby
authorizes Lender to file UCC Financing Statements concerning the
Collateral. Borrower agrees to execute and deliver any
documents (properly endorsed, if necessary) reasonably requested by
Lender for perfection or enforcement of any security interest or
lien, and to give good faith, diligent cooperation to Lender, and
to perform such other acts reasonably requested by Lender for
perfection and enforcement of any security interest or lien.
Lender is authorized to file, record, or otherwise utilize
such documents as it deems necessary to perfect and/or enforce any
security interest or lien granted hereunder.
c.
Borrower shall promptly
advise Lender of any material change in the Collateral, any
material claim concerning the Collateral, including without
limitation, the development of any new Collateral or any
modification to the Collateral, any claim of infringement, any
claim challenging the validity or enforceability of any Collateral,
and any other event which may have a material, adverse effect upon
any of the Collateral and/or the rights and remedies of Lender
concerning the Collateral.
d.
Borrower shall promptly
apply for a patent for all new inventions which are patentable with
the United States Patent and Trademark Office and promptly advise
Lender of the filing of the application for such patent.
Borrower shall use proper statutory notice in connection with
all uses of the Patents.
e.
Borrower shall promptly
register all new trademarks which are eligible for registration
with the United States Patent and Trademark Office and promptly
advise Lender of the filing of the application for such
registration. Borrower shall use proper statutory notice in
connection with all uses of the Trademarks. Borrower shall
use consistent standards of quality in the manufacture
of
