COLLATERAL SECURITY AGREEMENT
THIS COLLATERAL SECURITY AGREEMENT (this "Agreement") is made as of
December 31, 2005 by and between XXXXX X. XXXXXX AND XXXX X. XXXXXX, individuals
residing at 00 Xxxxxx Xxxxx Xxxx, Xxxxxx XX 00000 (collectively, the "Lender")
and INFINITE GROUP, INC., a Delaware corporation with its principal office at
000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 ("Borrower").
WHEREAS, the Borrower has executed and delivered to the Lender certain
Promissory Note dated December 31, 2005 (the "Note"), a copy of which is
attached hereto as Exhibit A; and
WHEREAS, in consideration of the Lender's agreement to lend money to the
Borrower, the Borrower has agreed to secure its debts and obligations under the
Note (the "Obligations"), with the pledge, assignment, transfer and grant of the
security interest as provided in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties agree as follows:
1. Grant of a Security Interest. As inducement for Lender to lend money to
Borrower, the Borrower hereby grants to Lender, as collateral for the payment or
repayment of Borrower's obligations under the Note, a security interest under
the Uniform Commercial Code for the State of New York, in all of Borrower's
assets, presently existing or hereafter arising, now owned or hereafter
acquired, and proceeds thereof (the "Collateral"), to be and remain effective
during any time when any indebtedness or Obligations whatsoever exist under the
Note.
2. Obligations Secured. This pledge, assignment, transfer and grant of a
security interest is made to secure to Lender the prompt and full payment and
performance of all of the Obligations in accordance with the terms of the Note.
3. Representations and Warranties. The Borrower hereby warrants and
represents to the Lender and covenants and agrees with the Lender as follows:
a. The Borrower is the record owner of the Collateral, free and
clear of any and all claims, liens, security interests,
attachments and encumbrances except those set forth in the
attached Schedule A.
b. The Borrower has full power, right and authority to execute,
deliver and perform the pledge, assignment, transfer and grant
of the security interest set forth herein and no further
action is necessary on the part of Borrower to make this
Agreement valid and binding upon Borrower in accordance with
its terms.
c. The execution, delivery, nor performance by Borrower of this
Agreement and/or the Note will not conflict with, or result
in, a violation or breach of any terms or provisions of, nor
constitute a default under, the Certificate of Incorporation
of Borrower, or under an indenture, mortgage, deed of trust,
or other contract or agreement to which Borrower is a party,
by which it or its property is bound.
4. Release of Collateral Upon Borrower's Payments. The parties agree that
upon the Borrower's payment to the Lender and satisfaction of all the
Obligations under the Note in accordance with the Note, that the Collateral and
the security interest created therein shall be released from the provisions of
this Agreement.
5. Covenants. Notwithstanding any provision herein and as long as any
amount of the principal and interest of the Note remains unpaid, Borrower
covenants and agrees that it shall:
a. Not sell, transfer, convey, lease or encumber (other than as
expressly contemplated by this Agreement) any part of the
Collateral, except that Borrower may grant a security interest
in the Collateral provided it is in a position secondary to
this Collateral Security Agreement and does not interfere with
the terms of this agreement and Borrower may sell and
substitute Collateral in the ordinary course of business.
b. Pay when due all taxes, assessments and other liabilities of
every nature which may be levied or assessed against Borrower
or the Collateral, except and so long as contested in good
faith.
c. In the event that Borrower shall be sued or any substantial
claims made against it which could materially adversely affect
its financial condition or its ability to pay the Note or
comply with and fulfill all the terms and provisions of this
Agreement, give written notice to Lender within ten (10) days
of knowledge thereof, containing sufficient details to apprize
Lender of the nature thereof.
d. Defend the Collateral against all claims and demands of all
persons claiming the same or any interest therein, which exist
or are caused by facts and circumstances arising after the
date hereof.
e. Promptly notify Lender of any change in the location of the
Collateral. f. Not use the Collateral in violation of any
applicable laws, statutes, regulations or ordinances.
Any and all of the foregoing may from time to time be waived in writing by
Lender.
6. Events of Default. Upon Borrower's breach of any term or condition of
this Agreement and/or the Note (an "Event of Default"), Borrower shall, upon
giving Lender ten (10) days advance written notice and Borrower's failure to
cure an event of default within said notice period, be entitled to exercise any
and all available rights including, but not by way of limitation, the following:
a. The right to declare all obligations secured by this Agreement
immediately due and payable.
b. All of the rights, remedies and powers of a secured party,
including without limitation all rights, remedies and powers
under the provisions the Uniform Commercial Code as adopted
and set forth in the statutes of the State of New York (the
"UCC") and, to the extent that a reasonable notice of sale or
disposition is required under the UCC, with respect to any
portion of the Collateral, that requirement shall be met if
such notice is mailed by certified or registered mail, postage
prepaid, to the Borrower at its address above at least seven
(7) days before the time of the sale or other disposition.
c. The right to seize the Collateral covered by this Agreement in
such order and such amounts as Creditor shall choose.
d. The right to have a receiver appointed by a court of competent
jurisdiction to collect, gather and possess any assets of
Borrower and to operate Borrower's business.
e. The right to collect from Borrower any and all costs incurred
by Lender in exercising its rights under this Agreement,
including but not limited to collection costs and reasonable
attorneys' fees.
Debtor further understands and agrees that any breach of any provisions hereof
by Borrower will cause irreparable harm and damage to Lender. Borrower hereby
expressly agrees that Lender shall be entitled to enjoin any actual or
threatened violation of any of the provisions of this Agreement or the Note. In
addition to injunctive relief, Lender may recover damages for any loss caused by
a violation or breach of any of the provisions thereof. All remedies hereunder
are cumulative and not exclusive of any other remedies provided at law or in
equity. Upon the occurrence of an Event of Default, after having received ten
(10) days advance written notice and Borrower's failure to cure such Event of
Default within said notice period, Borrower appoints Lender, as the duly
appointed attorney-in-fact of Borrower, with full power of substitution and
grants to Lender or its permitted assignee the full power and right to do any
and all things necessary to be done in and about the Collateral as fully and
effectually as Borrower might or could do but for this appointment, and hereby
ratifies all that said attorney-in-fact shall lawfully do or cause to be done by
virtue hereof. In addition to and notwithstanding the foregoing, in the event
that an Event of Default is uncured with the 10-day notice period, the Borrower
covenants and agrees to assist the Lender to the extent necessary to render the
Collateral suitable for sale, and to assist the Lender in connection with the
liquidation and sale of the Collateral in as expeditious a manner as possible
under the circumstances. Neither Lender, its permitted assignee nor their agents
shall be liable for any acts or omissions or for any error of judgment or
mistake of fact or law in its capacity as such attorney-in-fact. This power of
attorney is coupled with an interest and shall be irrevocable until the Note has
been paid in full.
7. Waivers by the Borrower. Except as otherwise specifically provided in
this Agreement and the Note, the Borrower hereby waives all presentment, demands
for performance, notice of nonperformance, notice of any indulgences, notices of
extensions or renewals relating to the Obligations, any requirement of diligent
performance on the Lender's part in the enforcement of its rights with respect
to the Obligations and Collateral, any and all notices of every kind and
description which may be required to be given to the Lender in connection with
the Obligations, this Agreement or the Collateral. No delay or omission on the
Lender's part in exercising any right or remedy under this Agreement shall
operate as a waiver of such right or remedy or any other right or remedy. A
waiver of any one occasion shall not be construed as a bar to or waiver of any
right on any future occasion.
8. Assignment. Neither party shall assign its rights or obligations
hereunder without the prior written consent of the other party. This Agreement
shall be binding upon and inure to the benefit of the parties and their
successors and permitted assigns.
9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original,
and all of which together shall be deemed to be one and the same instrument.
10. Severability. All provisions of this Agreement shall be considered as
separate terms and conditions, and in the event that any one shall be held
illegal, invalid or unenforceable, all other provisions hereof shall remain in
full force and effect as if the illegal, invalid or unenforceable provision were
not a part hereof, provided, however, that whenever possible, the illegal,
invalid or unenforceable provision shall be deemed modified and amended to the
extent that it may thereby be made legal, valid and enforceable. This Agreement,
all provisions and supplements thereof, all amendments thereto, and all acts,
transactions and agreements thereunder, and all duties, obligations, rights, and
remedies of the parties thereto, shall be governed as to their validity,
enforcement, construction and effect, and in all other respects by the laws of
the State of New York.
11. Notices. Any notice or demand or other communication which is required
or provided by any provision of this Agreement or any agreement, document or
instrument executed pursuant hereto shall be deemed to have been sufficiently
given for all purposes if hand-delivered or sent by certified mail, return
receipt requested to the parties at the addresses shown in the preamble to this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first set forth above.
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
INFINITE GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx, President and CEO
