SECURITY AGREEMENT
1. THE SECURITY
The undersigned Aptus Corp,. a Delaware corporation, ("Aptus") hereby
assigns and grants to Mark Andre ("Andre") a security interest in the following
described property ("Collateral"):
a. the "Assets" described within that certain Asset Purchase Agreement,
of even date, between Andre and Aptus, which are more particularly
described within Exhibit "A-1" which is attached hereto and
incorporated herein by reference; and
b. the "Assets" described within that certain Asset Purchase Agreement,
of even date, between Appgen Technologies, Inc., a Delaware
corporation ("Appgen") and Aptus, which are more particularly
described within Exhibit "A-2" which is attached hereto and
incorporated herein by reference.
The term "Collateral" shall also include all products and proceeds
(including, without limitation, insurance proceeds) of, and additions,
improvements, and accessions to, the Collateral described above, and all books
and records describing or relating to such Collateral (the "Books and Records").
2. THE INDEBTEDNESS
The Collateral secures and will secure all Indebtedness of Aptus to Andre.
For the purpose of this Agreement, "Indebtedness" means all obligations and
liabilities of Aptus to Andre and Appgen, whether now existing or hereafter
incurred or created, whether voluntary or involuntary, whether due or not due,
whether absolute or contingent, whether incurred directly or acquired by Andre
by assignment or otherwise, under that certain Asset Purchase Agreement, of even
date, between Andre and Aptus and the agreements executed in connection
therewith and/or referenced therein (including the Royalty Agreement and
Consulting Agreement referenced therein) and that certain Asset Purchase
Agreement, of even date, between Appgen and Aptus and/or the agreements executed
in connection therewith and referenced therein.
3. APTUS' REPRESENTATIONS, WARRANTIES, AND COVENANTS
Aptus represents, warrants and covenants that unless compliance is waived
by Andre in writing:
(a) Aptus is the owner of the Collateral and has good right, title and
authority to pledge, sell, transfer and assign the Collateral.
(b) There is no financing statement or other document creating or
evidencing a lien now on file in any public office covering any of the
Collateral, nor is there any lien or encumbrance on any of the Collateral.
(c) Aptus shall execute and deliver such financing statements, and do
such other things, as Andre may from time to time require in order to
perfect and preserve the security interest hereby granted and the priority
of such security interest.
(d) If any amount payable under or in connection with any of the
Collateral shall become evidenced by any promissory note or other
instrument, such instrument shall be immediately pledged to Andre hereunder
and Aptus shall deliver to Andre such instrument, duly endorsed in a manner
satisfactory to Andre.
(e) Aptus will properly preserve the Collateral; defend the Collateral
against any adverse claims and demands; and keep accurate Books and
Records.
(f) Aptus has notified Andre in writing of, and will notify Andre in
writing prior to any change in, the locations of (i) Aptus's place of
business or Aptus's chief executive office if Aptus has more than one place
of business, and (ii) any Collateral, including the Books and Records.
(g) Aptus will notify Andre in writing prior to any change in Aptus's
name, identity or business structure.
(h) Aptus will maintain and keep in force insurance policies covering
Collateral designated by Andre against loss by fire, explosion, theft, and
such other casualties as are typically insured against by companies in
similar businesses. Such insurance policies shall require losses to be paid
on a replacement cost basis and shall be in a form acceptable to Andre.
(i) Aptus has not granted and will not grant any security interest in
any of the Collateral except to Andre, and will keep the Collateral free of
all liens, claims, security interests and encumbrances of any kind or
nature except the security interest of Andre.
(j) Aptus will not sell, lease, agree to sell or lease, or otherwise
dispose of, or remove from Aptus's place of business any of the Collateral
except with the prior written consent of Andre, which consent shall not be
unreasonably withheld or delayed, provided that the purchaser of the
Collateral has a "net worth" of at least the greater of $3,000,000.00 or
three (3) times the total sums payable under the Indebtedness at the time
of the assignment and such purchaser assumes all obligations of Aptus that
are secured hereby.
(k) Aptus will promptly notify Andre in writing of any event which
affects the value of the Collateral, the ability of Aptus or Andre to
dispose of the Collateral, or the rights and remedies of Andre in relation
thereto, including, but not limited to, any levy or legal process against
any Collateral and the adoption of any marketing order, arrangement or
procedure affecting the Collateral, whether governmental or otherwise.
(l) If any Collateral is or becomes the subject of any registration
certificate or negotiable document of title, including any warehouse
receipt or bill of lading, Aptus shall immediately deliver such document to
Andre.
(m) Aptus will not attach any Collateral to any real property or
fixture in a manner which might cause such Collateral to become a part
thereof unless Aptus first obtains the written consent of any owner, holder
or any lien on the real property or fixture, or other person having an
interest in such property to the removal by Andre of the Collateral from
such real property or fixture. Such written consent shall be in form and
substance acceptable to Andre and shall provide the Andre has no liability
to such owner, holder of any lien, or any other person.
4. ADDITIONAL OPTIONAL REQUIREMENTS
In the event of a default hereunder, Aptus agrees that Andre may at his
option at any time thereafter upon ten (10) days written demand:
(a) Require Aptus to segregate all collections and proceeds of the
Collateral so that they are capable of identification and deliver daily
such collections and proceeds to Andre in kind.
(b) Require Aptus to deliver to Andre (i) copies of or extracts from
the Books and Records, and (ii) information on any contracts or other
matters affecting the Collateral.
(c) Examine the Collateral, including the Books and Records, and make
copies of or extracts from the Books and Records, and for such purposes
enter at any reasonable time upon the property where any Collateral or any
Books and Records are located.
(d) Require Aptus to deliver to Andre any instruments or chattel paper
constituting Collateral or proceeds of Collateral.
(e) Require Aptus to obtain Andre's prior written consent to any sale,
lease, agreement to sell or lease, or other disposition of any of the
Collateral.
(f) Notify any account debtors, any buyers of the Collateral, or any
other persons of Andre's interest in the Collateral.
5. DEFAULTS
Any one or more of the following shall be a default hereunder:
(a) Aptus fails to pay any Indebtedness within fifteen (15) days of
the date when due.
(b) Aptus breaches any material term, provision, warranty or
representation under this Agreement, or under any agreement secured hereby,
which breach is not cured within ten (10) business days of the date of the
notice to Aptus of such breach.
(c) Any custodian, receiver or trustee is appointed to take
possession, custody or control of all or a substantial portion of the
property of Aptus or of any guarantor of any Indebtedness.
(d) Aptus or any guarantor of any Indebtedness becomes insolvent, or
is generally not paying or admits in writing its inability to pay its debts
as they become due, fails in business, makes a general assignment for the
benefit of creditors, dies, or commences any case, proceeding or other
action under any bankruptcy or other law for the relief of, or relating to,
debtors. (e) Any case, proceeding or other action is commenced against
Aptus under any bankruptcy or other law for the relief of, or relating to,
debtors.
(f) Any involuntary lien of any kind or character attaches to any
Collateral.
(g) Any financial statements, certificates, schedules or other
information now or hereafter furnished by Aptus to Andre proves false or
incorrect in any material respect.
6. ANDRE'S REMEDIES AFTER DEFAULT
In the event of any default Andre may do any one or more of the following,
all without further demand, presentment, protest, notice of protest, notice of
intention to accelerate, notice of acceleration, or other notice of any kind,
all of which are hereby waived by Aptus to the extent permitted by applicable
law:
(a) Declare any outstanding Indebtedness immediately due and payable,
provided that there has been two (2) or more events of default in any
twelve (12) month period.
(b) Exercise all the rights and remedies available to a secured party
under the Uniform Commercial Code and any other applicable law.
(c) Require Aptus to assemble the Collateral, including the Books and
Records, and make them available to Andre at a place designated by Andre.
(d) Enter upon the property where any Collateral, including any Books
and Records, are located and take possession of such Collateral and such
Books and Records, and use such property (including any buildings and
facilities) and any of Aptus's equipment, if Andre deems such use necessary
or advisable in order to take possession of, hold, preserve, process,
assemble, prepare for sale or lease, market for sale or lease, sell or
lease, or otherwise dispose of, any Collateral.
(e) Grant extensions and compromise or settle claims with respect to
the Collateral for less than face value, all without prior notice to Aptus.
(f) Use any of Aptus's rights and interests in any Intellectual
Property now owned or hereafter acquired by Aptus, if Andre deems such use
necessary or advisable in order to take possession of, hold, preserve,
assemble, prepare for sale or lease, market for sale or lease, sell or
lease, or otherwise dispose of, any Collateral. Aptus agrees that any such
use shall be without any additional consideration to Aptus. As used in this
paragraph, "Intellectual Property" includes, but is not limited to, all
trade secrets, computer software, service marks, trademarks, trade names,
trade styles, copyrights, patents, applications for any of the foregoing,
customer lists, working drawings, instructional manuals, and rights in
processes for technical manufacturing, packaging and labelling, in which
Aptus has any right or interest, whether by ownership, license, contract or
otherwise.
(g) Have a receiver appointed by any court of competent jurisdiction
to take possession of the Collateral.
(h) Take such measures as Andre may deem necessary or advisable to
take possession of, hold, preserve, process, sell or lease, or otherwise
dispose of, any Collateral, and Aptus shall execute all such documents as
may be required by Andre, after an event of default, in connection
therewith to effectuate the actions described above. Aptus acknowledges and
agrees that its failure to execute any such document shall irreparably harm
Andre and as such, injunctive relief may be obtained by Andre to compel the
actions set out above.
7. MISCELLANEOUS
(a) Any waiver, express or implied, of any provision hereunder and any
delay or failure by Andre to enforce any provision shall not preclude Andre
from enforcing any such provision thereafter.
(b) Aptus shall, at the request of Andre, execute such other
agreements, documents, instruments, or financing statements in connection
with this Agreement as Andre may reasonably deem necessary.
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE
LAWS OF THE STATE OF NEW YORK, TO THE JURISDICTION OF WHICH THE PARTIES
HERETO SUBMIT.
(d) All rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies otherwise provided by law. Any single
or partial exercise of any right or remedy shall not preclude the further
exercise thereof or the exercise of any other right or remedy.
(e) All terms not defined herein are used as set forth in the Uniform
Commercial Code.
(f) In the event of any action by either party to this Agreement to
enforce the terms of this Agreement, the prevailing party in any such
action shall be entitle to its reasonable costs and attorney's fees.
8.
SIGNATURES
This document is executed by Aptus as of January 23, 2004.
Aptus:
Aptus, Corp.
By:/s/ John P. Gorst
John P. Gorst, President
Address where notices to
the Aptus are to be sent
Aptus, Corp.
1127 Broadway Plaza, Suite 203
Tacoma, Washington 98402
Andre:
/s/ Mark Andre
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Mark Andre
Address where notices to
Andre are to be sent
P.O Box 86
Great River, New York 11739