EXHIBIT 10.41
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JOINT SECURITY AGREEMENT
THIS JOINT SECURITY AGREEMENT is made as of this 9th day of November,
2000, by Heartsoft, Inc., a Delaware corporation ("Debtor"), and Benjamin Shell
("Pledgor"), in favor of Alan W. Carlton Revocable Living Trust (the "Trust")
and June Limited Partnership (the "Partnership"). The Trust and the Partnership
are collectively referred to herein as the "Secured Parties."
WHEREAS, the Trust and the Partnership have each loaned $250,000 to
Debtor pursuant to Promissory Notes of even date (collectively, the "Notes");
WHEREAS, Pledgor is the chief executive officer of Debtor and, in order
to induce the Trust and the Partnership to loan an aggregate of $500,000 to
Debtor, desires to pledge the Collateral to secure the Indebtedness (as defined
below); and
WHEREAS, the Trust and the Partnership desire to share on a pro rata
basis all principal and interest payments on the Notes and proceeds from the
sale of Collateral securing the indebtedness and to make joint decisions
regarding the declaration of events of default and the exercise of remedies
under the Notes and this Joint Security Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Debtor does hereby covenant and agree as follows:
1. Definitions. The terms as used herein shall be construed and
controlled by the following definitions, and except as the context may otherwise
require or as may be otherwise provided herein, the singular shall be deemed to
include the plural and the plural shall be deemed to include the singular.
1.1 Collateral. "Collateral" shall mean and include the
following property: (i) the Heartsoft Stock, and (ii) all proceeds of
the Heartsoft Stock, including all dividends (cash, stock or otherwise)
or other property, rights or claims received upon the disposition of,
collection upon, release or cancellation of, or otherwise on account of
said property or any part thereof.
1.2 Event of Default. "Event of Default" shall have the
meaning set forth in Section 6.
1.3 Heartsoft Stock. "Heartsoft Stock" shall mean 500,000
shares of Heartsoft, Inc. common stock owned by Pledgor.
1.4 Indebtedness. "Indebtedness" shall mean and include all
indebtedness of Debtor to Secured Parties arising out of or relating to
the Notes.
2. Security Interest. Pledgor hereby assigns and grants to Secured
Party a security interest in the Collateral to secure the Indebtedness.
3. Delivery and Possession of Collateral. Contemporaneously with the
execution and delivery hereof, Pledgor shall deliver to Monty Montgomery, as
agent of Secured Parties, the physical possession of the Heartsoft Stock
together with an Assignment Separate From Certificate executed in blank by
Pledgor.
4. Representations and Warranties. Pledgor hereby represents and
warrants to Secured Parties that:
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4.1 Ownership; Free of Encumbrances. Pledgor is and will
remain the legal and beneficial owner of the Collateral, free and clear
of any prior liens, security interests, encumbrances or conflicting
claims, or rights of any kind, except the security interest created
hereby, and Pledgor will not transfer or offer or attempt to transfer,
by lease or sale or otherwise, any interest in the Collateral or
possession thereof without the express written consent of Secured
Parties.
All of the shares of the Heartsoft Stock have been duly and
validly issued and are fully paid and nonassessable. Pledgor will
defend the Collateral against all claims and demands of all persons at
any time claiming the Collateral or any interest therein. No security
agreement, financing statement or other public notice with respect to
all or any part of the Collateral is on file or of record in any public
office except such as may have been filed pursuant to this Joint
Security Agreement.
5. Voting Rights. Unless an Event of Default shall have occurred and be
continuing, Pledgor shall be entitled to vote the Heartsoft Stock and to give
consents, waivers and ratifications in respect of the Heartsoft Stock.
6. Covenants of Debtor. Debtor covenants and agrees that so long as the
Note shall be outstanding that:
6.1 Debtor will not create, incur, assume, guarantee or in any
manner become liable in respect of any indebtedness except for (i)
liabilities incurred by Debtor in the ordinary course of its business
and (ii) indebtedness (when aggregated with amounts referred to in
Section 6.3(ii)(B) hereof), would not exceed $750,000 which has been
placed by or with any of the persons or entities listed in the letter
dated even date of Heartsoft to Secured Parties. The term
"indebtedness" shall mean and include all items which in accordance
with generally accepted accounting principles would be included in
determining total liabilities as shown on the liability side of a
balance sheet as of the date at which indebtedness is to be determined.
6.2 Debtor shall not amend its certificate of incorporation or
its bylaws, except for amendments to the bylaws which do not affect the
rights of Holder. Debtor shall comply with all of the provisions of its
certificate of incorporation and its bylaws.
6.3 Except as otherwise provided in this Section 6.3, Debtor
shall not make any change in its capital structure, including, without
limitation, (i) the issuance of any equity securities (including,
without limitation, treasury shares and shares that have been
permanently retired) or (ii) the issuance of any warrants, options or
other rights to purchase equity securities of Debtor. Notwithstanding
the foregoing, Debtor shall be entitled (A) to grant options to acquire
shares of its common stock to its employees hired after the date
hereof, so long as no portion of the options vest for a period of one
year from the date of grant and (B) to issue equity securities which
have been purchased or placed by any of the persons or entitles listed
in the letter dated even date of Heartsoft to Secured Parties as long
as the aggregate purchase price of such equity securities (when
aggregated with any amounts referred to in Section 6.3(ii) hereof),
would not exceed $750,000.
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6.4 Debtor shall not, by operation of law or otherwise, merge
with, consolidate with, acquire all or substantially all of the assets
of, acquire all or substantially all of the securities or interests in
or otherwise combine with any other entity. This Section 6.4 shall not
affect the ability of Debtor to organize subsidiaries to acquire other
businesses as long as (a) all of the equity securities and debt and
other securities convertible into, or exchangeable or exercisable for
equity securities are owned by Debtor and (b) such organization does
not materially adversely affect the performance by Debtor under the
Notes.
6.5 Debtor shall not sell, convey, transfer or dispose of any
of its assets other than, (i) sales of its inventory to its customers
in the ordinary course of its business, (ii) sales of assets at a price
equal to, or greater than, their fair market value, except for the sale
of all or a significant portion of the assets of Debtor in one
transaction or a series of related transactions and (iii) sales of
assets that do not either individually or in the aggregate materially
adversely affect the performance by Debtor of the Notes.
6.6 Debtor shall take all actions necessary to preserve and to
keep in fully force and effect its corporate existence. Debtor shall
not take any action or omit to take any action, which act or omission
may result in the loss of such corporate existence or the dissolution,
liquidation or winding up of Debtor.
6.7 Debtor shall not declare or pay any dividends or incur any
liability to make any other payment or distribution of cash or other
assets of Debtor in respect of any equity security of Debtor.
6.8 Debtor shall not pay any bonuses or other extraordinary
payments to any officer or director of Debtor, other than salaries
currently in effect or bonuses which Debtor is currently obligated to
pay.
6.9 Debtor shall use the proceeds from the Notes for the
conduct of its business in the ordinary course.
7. Default. The term "Event of Default" for all purposes of this Joint
Security Agreement shall mean one or more of the following:
7.1 Note Payments. Failure to pay principal or interest under
either Note when and as the same shall become due and payable, whether
at the due date thereof, by acceleration or otherwise.
7.2 Other Default in Payment or Performance. Default in the
payment, performance or observance by Debtor or Pledgor of any other
obligation, covenant or liability contained or referred to herein or in
the Notes or the Letter Agreements of even date between Debtor and each
of the Trust and the Partnership (the "Letter Agreements") and any such
default shall continue unremedied for ten (10) days after Debtor and
Pledgor obtain notice thereof.
7.3 Material Inaccuracy. Material inaccuracy in any of the
representations and warranties of Debtor to Secured Parties contained
in the Letter Agreements.
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7.4 Dissolution; Insolvency. (i) Debtor shall commence any
case, proceeding, or other action (A) under any existing or future law
or any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding up, liquidation, dissolution, composition, or other
like relief with respect to it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian, or other similar official for it, or
for all or any substantial part of its assets, or make a general
assignment for the benefit of its creditors; or (ii) there be commenced
against Debtor any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment, or (B)
remains dismissed, undischarged, or unbonded for a period of thirty
(30) days; or (iii) there be commenced against Debtor any case,
proceeding, or other action seeking issuance of a warrant of
attachment, execution, restraint or similar process against all or any
substantial part of its assets which results in the entry of an order
for any such relief which shall not have been vacated, discharged,
stayed or bonded pending appeal within thirty (30) days from the entry
thereof; or (iv) any action be taken by Debtor in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii) or (iii) above.
7.5 Discontinuance of Change of Business. Debtor shall
discontinue its business or materially change the nature or scope of
its business.
7.6 Cessation of Trading. Shares of common stock of Debtor
shall cease being listed on NASDAQ's Over the Counter Bulletin Board.
7.7 Litigation. There shall have been filed a lawsuit against
Debtor alleging potential money damages in excess of $100,000 or any
governmental agency shall have instituted proceedings against Debtor in
which its total monetary exposure exceeds $100,000.
7.8 SEC Orders, etc. The Securities and Exchange Commission or
any other state securities agency shall have issued an order against
Debtor in which it is ordered to cease and desist from engaging in any
improper conduct.
8. Remedies. Upon the occurrence of any Event of Default and at any
time thereafter, Secured Parties jointly shall have and may exercise the
following rights and remedies, without further notice to Debtor or Pledgor:
8.1 Acceleration. Declare the Notes to be immediately due and
payable whereupon the same shall become forthwith due and payable.
8.2 All Legal Remedies. Proceed to enforce and exercise any
and all rights and remedies which Secured Parties may have under this
Joint Security Agreement or applicable law, including, without
limitation: (i) commencing one or more actions against Debtor and
reducing the claims of Secured Parties against Debtor to judgment, and
(ii) foreclosure or other enforcement of Secured Parties' security
interest in the Collateral, or any portion thereof, or other
enforcement of Secured Parties' rights and remedies in respect of and
to recover upon the Collateral, through judicial action or otherwise,
including all available remedies under the applicable provisions of the
Oklahoma Uniform Commercial Code.
8.3 Disposition. Sell, lease or otherwise dispose of the
Collateral at private or public sale, in bulk or in parcels and, where
permitted by law, without having the Collateral present at the place of
sale. Secured Parties will give Pledgor and Debtor reasonable notice of
the time and place of any public sale or other disposition thereof or
the time after which any private sale or disposition thereof is to be
made. The requirements of reasonable notice shall be met if such notice
is given to Pledgor and Debtor at least five (5) business days before
the time of any such sale or disposition.
Secured Parties shall not be obligated to make any such sale
pursuant to any such notice. Secured Parties may, without notice or
publication, adjourn any public or private
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sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned.
Secured Parties acknowledge that the Securities Act of 1933, as
amended, and certain other federal and state laws or regulations may
constitute legal restrictions or limitations upon Secured Parties in
any attempts to dispose of any portion of the Collateral which
constitutes securities and the enforcement by Secured Parties of their
rights and remedies with respect thereto.
8.4 Costs and Expenses. Recover from Debtor an amount equal to
all reasonable costs, expenses and attorney's fees incurred by Secured
Parties in connection with the exercise of the rights contained or
referred to herein, together with interest on such sums at the
post-default rate applicable to the Notes from time to time. Reasonable
costs shall include $300 an hour for the time spent by representatives
of Secured Parties in exercising their rights hereunder.
9. Application of Proceeds. All monies collected by Secured Parties
upon the sale of the Collateral hereunder, together with any other monies
received by Secured Parties hereunder, shall be applied by Secured Parties to
the payment of all costs and expenses reasonably incurred by Secured Parties in
connection with such sale, the delivery of such Collateral or the collection of
any such monies (including, without limitation, reasonable attorney's fees and
expenses), and the balance of such monies shall be applied by Secured Parties
pro rata to the payment of the Indebtedness, and the remainder, if any, shall be
returned to Pledgor.
10. Termination. This Joint Security Agreement shall terminate upon
payment in full in cash of the Indebtedness in which event Secured Parties shall
forthwith assign, transfer and deliver to Pledgor all of the Heartsoft Stock, if
any, then held by them in pledge hereunder.
11. Miscellaneous.
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11.1 Cumulative Remedies. No failure on the part of Secured
Parties to exercise and no delay in exercising any right under this
Joint Security Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise by Secured Parties of any right
hereunder preclude any other or further right of exercise thereof or
the exercise of any other right. The remedies herein provided are
cumulative and not alternative.
11.2 Notices. All notices, requests and demands shall be
served by registered or certified mail as follows:
DEBTOR: Heartsoft, Inc.
3103 North Hemlock
Broken Arrow, OK 74012
Attn: Chief Executive Officer
SECURED PARTIES: Alan W. Carlton Revocable Living Trust
10770 South 77th East Avenue
Tulsa, OK 74133
Attn: Alan W. Carlton, Trustee
June Limited Partnership
8086 South Yale, PMB#23
Tulsa, OK 74136
Attn: Robert K. Pezold, General Partner
And
C. Philip Tholen
June Limited Partnership
4203 East 75th Place
Tulsa, OK 74136
PLEDGOR: Benjamin Shell
3101 North Hemlock
Broken Arrow, OK 74012
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or at such other address as Debtor, Pledgor and Secured Parties shall designate
for such purpose in a written notice to the other party hereto and shall be
effective and deemed given three (3) business days after deposit in the U.S.
Mail, first class postage prepaid or when personally delivered.
11.3 Interpretation. This Joint Security Agreement shall be
deemed to be a contract made under the laws of the State of Oklahoma and shall
be construed in accordance with the laws of said State (without regard to its
conflicts of laws principles). The descriptive headings of the sections of this
Joint Security Agreement are for convenience only and shall not be used in the
construction of the content of this Joint Security Agreement.
11.4 Binding Effect. This Joint Security Agreement shall be
binding on Debtor and Pledgor and their respective successors and assigns and
shall inure to the benefit of Secured Parties and their respective successors
and assigns.
11.5 Severability. In the event ay one or more of the
provisions contained in this Joint Security Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision hereof.
11.6 Amendment. This Joint Security Agreement cannot be
amended except by an agreement in writing signed by the party or parties against
whom enforcement of any waiver, change, modification or discharge is sought.
11.7 Counterparts. This Joint Security Agreement shall be
executed in multiple counterparts, each of which when duly executed and
delivered shall be an original but such counterparts shall together constitute
but one and the same instrument.
11.8 Assignment. This Joint Security Agreement, the Notes and
the Letter Agreements may not be assigned, transferred or assumed by either
Debtor or Pledgor without the prior written consent of both Secured Parties.
This Joint Security Agreement, the Notes and the Letter Agreements may be
assigned, transferred or assumed by Secured Parties without the prior consent of
either Debtor or Pledgor, provided that any such assignment or transfer shall be
to a third party who is able to make the representations contained in Section 2
of the Letter Agreements.
IN WITNESS WHEREOF, Debtor and Pledgor have executed and delivered this
Joint Security Agreement to and in favor of Secured Parties on the day and year
first above written.
"DEBTOR"
HEARTSOFT, INC.
By: /s/ Benjamin P. Shell
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Benjamin Shell, Chairman and CEO
"PLEDGOR"
/s/ Benjamin P. Shell
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Benjamin Shell
ACCEPTED:
"SECURED PARTIES"
ALAN W. CARLTON REVOCABLE LIVING TRUST
By: /s/ Alan W. Carlton
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Alan W. Carlton, Trustee
JUNE LIMITED PARTNERSHIP
By: /s/ Robert K. Pezold
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General Partner
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