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EXHIBIT 2.4
SOURCE CODE ESCROW AGREEMENT
Account Number ______________________
This Agreement is effective January 25, 1999 among Data Securities
International, Inc. ("DSI"), Apexx Technology, Inc. ("Depositor") and eSoft,
Inc. ("Preferred Beneficiary"), who collectively may be referred to in this
Agreement as "the Parties."
A. Depositor and Preferred Beneficiary have entered into an Agreement
and Plan of Merger dated as of December 22, 1998 (the "Merger Agreement")
pursuant to which Depositor will become a wholly owned subsidiary of Preferred
Beneficiary.
B. Depositor and Preferred Beneficiary desire to avoid any tampering
with or corruption of Depositor's proprietary technology pending the merger of
Depositor with and into Preferred Beneficiary's wholly owned subsidiary (the
"Merger").
C. Depositor and Preferred Beneficiary desire to establish an escrow
with DSI to provide for the retention, administration and controlled access of
the proprietary technology materials of Depositor until such time of the Merger
is effected or the Merger Agreement is terminated.
ARTICLE 1
DEPOSITS
1.1 OBLIGATION TO MAKE DEPOSIT. Upon the signing of this Agreement by
the parties, Depositor shall deliver to DSI the proprietary information and
other materials identified on Exhibit A hereto (the "Deposit Materials").
Exhibit A shall be prepared and signed by Depositor and Preferred Beneficiary.
DSI shall have no obligation with respect to the preparation, signing or
delivery of Exhibit A.
1.2 IDENTIFICATION OF TANGIBLE MEDIA. Prior to the delivery of the
Deposit Materials to DSI, Depositor shall conspicuously label for
identification each document, magnetic tape, disk, or other tangible media upon
which the Deposit Materials are written or stored. Additionally, Depositor
shall complete Exhibit B to this Agreement by listing each such tangible media
by the item label description, the type of media and the quantity. Exhibit B
must be signed by Depositor and delivered to DSI with the Deposit Materials.
Unless and until Depositor makes the initial deposit with DSI, DSI shall have
no obligation with respect to this Agreement, except the obligation to notify
the parties regarding the status of the deposit account as required in Section
2.2 below.
1.3 DEPOSIT INSPECTION. When DSI receives the Deposit Materials and
Exhibit B, DSI will conduct a deposit inspection by visually matching the
labeling of the tangible media containing the Deposit Materials to the item
descriptions and quantity listed on Exhibit B. In addition to the deposit
inspection, Preferred Beneficiary may elect to cause a verification of the
Deposit Materials in accordance with Section 1.6 below.
1.4 ACCEPTANCE OF DEPOSIT. Upon completion of the deposit inspection,
if DSI determines that the labeling of the tangible media matches the item
descriptions and quantities on Exhibit B, DSI will date and sign Exhibit B and
mail a copy thereof to Depositor and Preferred Beneficiary. If DSI determines
that the labeling does not match the item descriptions or quantity on the
Exhibit B, DSI will (a) note the discrepancies in writing on Exhibit B; (b)
date and sign Exhibit B with the exceptions noted; and (c) provide a copy of
Exhibit B to Depositor and Preferred Beneficiary. DSI's acceptance of the
deposit occurs upon the signing of Exhibit B by DSI. Delivery of the signed
Exhibit B to Preferred Beneficiary is Preferred Beneficiary's notice that the
Deposit Materials have been received and accepted by DSI.
1.5 DEPOSITOR'S REPRESENTATIONS. Depositor represents as follows:
a. Depositor lawfully possesses all of the Deposit Materials;
b. With respect to all of the Deposit Materials, Depositor has the
right and authority to grant to DSI and Preferred Beneficiary the
rights as provided in this Agreement;
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c. Except as identified on Exhibit A, the Deposit Materials are not
subject to any lien or other encumbrance;
d. The Deposit Materials consist of the proprietary information and
other materials identified in Exhibit A; and
e. The Deposit Materials are readable and useable in their current
form or, if the Deposit Materials are encrypted, the decryption
tools and decryption keys have also been deposited.
1.6 VERIFICATION. Preferred Beneficiary shall have the right, at
Preferred Beneficiary's expense, to cause a verification of any Deposit
Materials to be completed. A verification determines, in different levels of
detail, the accuracy, completeness, sufficiency and quality of the Deposit
Materials. If a verification is elected after the Deposit Materials have been
delivered to DSI, then only DSI, or at DSI's election an independent person or
company selected and supervised by DSI, may perform the verification.
1.7 DEPOSIT UPDATES. Depositor shall update the Deposit Materials
within 60 days of each release of a new version of a product. Such updates will
be added to the existing deposit. All deposit updates shall be listed on a new
Exhibit B and the new Exhibit B shall be signed by Depositor. Each Exhibit B
will be held and maintained separately within the escrow account. An
independent record will be created which will document the activity for each
Exhibit B. The processing of all deposit updates shall be in accordance with
Sections 1.2 through 1.6 above. All references in this Agreement to the Deposit
Materials shall include the initial Deposit Materials and any updates.
1.8 REMOVAL OF DEPOSIT MATERIALS. The Deposit Materials may be removed
and/or exchanged only on written instructions signed by Depositor and Preferred
Beneficiary, or as otherwise provided in this Agreement.
ARTICLE 2
CONFIDENTIALITY AND RECORD KEEPING
2.1 CONFIDENTIALITY. DSI shall maintain the Deposit Materials in a
secure, environmentally safe, locked facility which is accessible only to
authorized representatives of DSI. DSI shall have the obligation to reasonably
protect the confidentiality of the Deposit Materials. Except as provided in
this Agreement, DSI shall not disclose, transfer, make available, or use the
Deposit Materials. DSI shall not disclose the content of this Agreement to any
third party. If DSI receives a subpoena or other order of a court or other
judicial tribunal pertaining to the disclosure or release of the Deposit
Materials, DSI will immediately notify the parties to this Agreement. It shall
be the responsibility of Depositor and/or Preferred Beneficiary to challenge
any such order; provided, however, that DSI does not waive its rights to
present its position with respect to any such order. DSI will not be required
to disobey any court or other judicial tribunal order. (See Section 6.5 below
for notices of requested orders.)
2.2 STATUS REPORTS. DSI will issue to Depositor and Preferred
Beneficiary a report profiling the account history at least semi-annually. DSI
may provide copies of the account history pertaining to this Agreement upon the
request of any party to this Agreement.
2.3 AUDIT RIGHTS. During the term of this Agreement, Depositor and
Preferred Beneficiary each shall have the right to inspect the written records
of DSI pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.
ARTICLE 3
GRANT OF RIGHTS TO DSI
3.1 TITLE TO MEDIA. Depositor hereby transfers to DSI the title to the
media upon which the proprietary information and materials are written or
stored. However, this transfer does not include the ownership of the
proprietary information and materials contained on the media such as any
copyright, trade secret, patent or other intellectual property rights.
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3.2 RIGHT TO MAKE COPIES. DSI shall have the right to make copies of
the Deposit Materials as reasonably necessary to perform this Agreement. DSI
shall copy all copyright, nondisclosure, and other proprietary notices and
titles contained on the Deposit Materials onto any copies made by DSI. With all
Deposit Materials submitted to DSI, Depositor shall provide any and all
instructions as may be necessary to duplicate the Deposit Materials including
but not limited to the hardware and/or software needed.
3.3 RIGHT TO TRANSFER UPON RELEASE. Depositor hereby grants to DSI the
right to transfer the Deposit Materials to Preferred Beneficiary or Depositor
as follows: (a) upon termination of this Agreement in accordance with Section
4.1(a), the Deposit Materials shall be transferred to the Preferred
Beneficiary, and (b) upon termination of this Agreement in accordance with
Section 4.1(b) or 4.1(c), the Deposit Materials shall be transferred to the
Depositor. Except upon such a release or as otherwise provided in this
Agreement, DSI shall not transfer the Deposit Materials.
ARTICLE 4
TERM AND TERMINATION
4.1 TERM OF AGREEMENT. This Agreement is to remain in effect until the
earlier of (a) the Effective Time (as defined in the Merger Agreement); (b) the
date that the Merger Agreement is terminated pursuant to Article X thereof; or
(c) the Agreement is terminated by DSI for nonpayment in accordance with
Section 5.2. If the Deposit Materials are subject to another escrow agreement
with DSI, DSI reserves the right, after the initial one year term, to adjust
the anniversary date of this Agreement to match the then prevailing anniversary
date of such other escrow arrangements.
4.2 TERMINATION FOR NONPAYMENT. In the event of the nonpayment of fees
owed to DSI, DSI shall provide written notice of delinquency to all parties to
this Agreement. Any party to this Agreement shall have the right to make the
payment to DSI to cure the default. If the past due payment is not received in
full by DSI within one month of the date of such notice, then DSI shall have
the right to terminate this Agreement at any time thereafter by sending written
notice of termination to all parties. DSI shall have no obligation to take any
action under this Agreement so long as any payment due to DSI remains unpaid.
4.3 DISPOSITION OF DEPOSIT MATERIALS UPON TERMINATION. Upon
termination of this Agreement, DSI shall destroy, return, or otherwise deliver
the Deposit Materials to Depositor or Preferred Beneficiary in accordance with
Section 3.3 of this Agreement. DSI shall have no obligation to return or
destroy the Deposit Materials if the Deposit Materials are subject to another
escrow agreement with DSI.
4.4 SURVIVAL OF TERMS FOLLOWING TERMINATION. Upon termination of this
Agreement, the following provisions of this Agreement shall survive:
a. Depositor's Representations (Section 1.5);
b. The obligations of confidentiality with respect to the Deposit
Materials;
c. The obligation to pay DSI any fees and expenses due;
d. The provisions of Article 7; and
e. Any provisions in this Agreement which specifically state they
survive the termination or expiration of this Agreement.
ARTICLE 5
DSI'S FEES
5.1 FEE SCHEDULE. DSI is entitled to be paid its standard fees and
expenses applicable to the services provided. DSI shall notify the party
responsible for payment of DSI's fees at least 90 days prior to any increase in
fees. For any service not listed on DSI's standard fee schedule, DSI will
provide a quote prior to rendering the service, if requested.
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5.2 PAYMENT TERMS. DSI shall not be required to perform any service
unless the payment for such service and any outstanding balances owed to DSI
are paid in full. Fees are due upon receipt of a signed contract or receipt of
the Deposit Materials whichever is earliest. If invoiced fees are not paid, DSI
may terminate this Agreement in accordance with Section 5.2. Late fees on past
due amounts shall accrue interest at the rate of one and one-half percent per
month (18% per annum) from the date of the invoice.
ARTICLE 6
LIABILITY AND DISPUTES
6.1 RIGHT TO RELY ON INSTRUCTIONS. DSI may act in reliance upon any
instruction, instrument, or signature reasonably believed by DSI to be genuine.
DSI may assume that any employee of a party to this Agreement who gives any
written notice, request, or instruction has the authority to do so. DSI shall
not be responsible for failure to act as a result of causes beyond the
reasonable control of DSI.
6.2 INDEMNIFICATION. DSI shall be responsible to perform its
obligations under this Agreement and to act in a reasonable and prudent manner
with regard to this escrow arrangement. Provided DSI has acted in the manner
stated in the preceding sentence, Depositor and Preferred Beneficiary each
agree to indemnify, defend and hold harmless DSI from any and all claims,
actions, damages, arbitration fees and expenses, costs, attorney's fees and
other liabilities incurred by DSI relating in any way to this escrow
arrangement.
6.3 DISPUTE RESOLUTION. Any dispute relating to or arising from this
Agreement shall be resolved by arbitration under the Commercial Rules of the
American Arbitration Association. Unless otherwise agreed by Depositor and
Preferred Beneficiary, arbitration will take place in Denver, Colorado, U.S.A.
Any court having jurisdiction over the matter may enter judgment on the award
of the arbitrator(s). Service of a petition to confirm the arbitration award
may be made by First Class mail or by commercial express mail, to the attorney
for the party or, if unrepresented, to the party at the last known business
address.
6.4 CONTROLLING LAW. This Agreement is to be governed and construed in
accordance with the laws of the State of Delaware, without regard to its
conflict of law provisions.
6.5 NOTICE OF REQUESTED ORDER. If any party intends to obtain an order
from the arbitrator or any court of competent jurisdiction which may direct DSI
to take, or refrain from taking any action, that party shall:
a. Give DSI at least two business days' prior notice of the hearing;
b. Include in any such order that, as a precondition to DSI's
obligation, DSI be paid in full for any past due fees and be paid
for the reasonable value of the services to be rendered pursuant to
such order; and
c. Ensure that DSI not be required to deliver the original Deposit
Materials (as opposed to a copy) if DSI may need to retain the
original in its possession to fulfill any of its other duties.
ARTICLE 7
GENERAL PROVISIONS
7.1 ENTIRE AGREEMENT. This Agreement, which includes the Exhibits
described herein, embodies the entire understanding among the parties with
respect to its subject matter and supersedes all previous communications,
representations or understandings, either oral or written. DSI's only
obligations to Depositor or Preferred Beneficiary are as set forth in this
Agreement. No amendment or modification of this Agreement shall be valid or
binding unless signed by all the parties hereto, except that Exhibit A need not
be signed by DSI, Exhibit B need not be signed by Preferred Beneficiary and
Exhibit C need not be signed.
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7.2 NOTICES. All notices, invoices, payments, deposits and other
documents and communications shall be given to the parties at the addresses
specified in the attached Exhibit C. It shall be the responsibility of the
parties to notify each other as provided in this Section in the event of a
change of address. The parties shall have the right to rely on the last known
address of the other parties. Unless otherwise provided in this Agreement, all
documents and communications may be delivered by First Class mail.
7.3 SEVERABILITY. In the event any provision of this Agreement is
found to be invalid, voidable or unenforceable, the parties agree that unless
it materially affects the entire intent and purpose of this Agreement, such
invalidity, voidability or unenforceability shall affect neither the validity
of this Agreement nor the remaining provisions herein, and the provision in
question shall be deemed to be replaced with a valid and enforceable provision
most closely reflecting the intent and purpose of the original provision.
7.4 SUCCESSORS. This Agreement shall be binding upon and shall inure
to the benefit of the successors and assigns of the parties. However, DSI shall
have no obligation in performing this Agreement to recognize any successor or
assign of Depositor or Preferred Beneficiary unless DSI receives clear,
authoritative and conclusive written evidence of the change of parties.
7.5 REGULATIONS. Depositor and Preferred Beneficiary are responsible
for and warrant compliance with all applicable laws, rules and regulations,
including but not limited to customs laws, import, export, and re-export laws
and government regulations of any country to which the Deposit Materials may be
delivered in accordance with the provisions of this Agreement.
SIGNATURE PAGE FOLLOWS
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DEPOSITOR PREFERRED BENEFICIARY
Apexx Technology, Inc. eSoft, Inc.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------- --------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: President Title: President
Date: January 25, 1999 Date: January 25, 1999
Data Securities International, Inc.
By:
----------------------------
Name:
Title:
Date:
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EXHIBIT A
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MATERIALS TO BE DEPOSITED
Account Number ___________________________
Depositor represents to Preferred Beneficiary that Deposit Materials delivered
to DSI shall consist of the following:
DEPOSITOR PREFERRED BENEFICIARY
Apexx Technology, Inc. eSoft, Inc.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------- --------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: President Title: President
Date: January 25, 1999 Date: January 25, 1999
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EXHIBIT B
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DESCRIPTION OF DEPOSIT MATERIALS
Depositor Company Name: Apexx Technology, Inc.
Account Number
----------------------------------------------------------------
Product Name Version
----------------------------------- -----------------------
(Product Name will appear on Account History report)
DEPOSIT MATERIAL DESCRIPTION:
Quantity Media Type & Size Label Description of Each Separate Item
(Please use other side if additional space is needed)
_______ Disk 3.5" or ____
_______ DAT tape ____ mm
_______ CD-ROM
_______ Data cartridge tape ____
_______ TK 70 or ____ tape
_______ Magnetic tape ____
_______ Documentation
_______ Other ______________________
PRODUCT DESCRIPTION:
Operating System
--------------------------------------------------------------
Hardware Platform
-------------------------------------------------------------
DEPOSIT COPYING INFORMATION:
Is the media encrypted? Yes / No If yes, please include any passwords and the
decryption tools.
Encryption tool name Version
----------------------------- ----------------------
Hardware required
--------------------------------------------------------------
Software required
--------------------------------------------------------------
I certify for Depositor that the above described DSI has inspected and accepted
the above Deposit Materials have been transmitted to DSI: materials (any
exceptions are noted above):
Signature Signature
------------------------------ -----------------------------
Print Name Print Name
----------------------------- ----------------------------
Date Date Accepted
----------------------------------- -------------------------
Exhibit B#
----------------------------
Send materials to: DSI, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇. #▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (619) 694-1900
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EXHIBIT C
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DESIGNATED CONTACT
Account Number _______________________
Notices, Deposit Material returns and
communications to Depositor should be
addressed to: Invoices to Depositor should
be addressed to:
Company Name: Apexx Technology, Inc. Apexx Technology, Inc.
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Designated Contact: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ Attn: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notices and communications to Invoices to Preferred Beneficiary
Preferred Beneficiary should be should be addressed to:
addressed to:
Company Name: eSoft, Inc. eSoft, Inc.
Address: ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Designated Contact: ▇▇▇▇▇▇▇ ▇▇▇▇ Attn: ▇▇▇▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Requests from Depositor or Preferred Beneficiary to change the designated
contact should be given in writing by the designated contact or an authorized
employee of Depositor or Preferred Beneficiary.
Contracts, Deposit Materials and Invoice inquiries and fee remittances
notices to DSI should be to DSI should be addressed to:
addressed to:
DSI DSI
Contract Administration Accounts Receivable
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Date:
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