SECURITY AGREEMENT
This Security Agreement (this "Security Agreement") is made on
September 4, 1998, by Augment Systems, Inc., 0 Xxxxxxx Xxxx, Xxxxxxxx,
Xxxxxxxxxxxxx 00000-0000 ("Debtor"), in favor of the persons listed on Exhibit A
hereto ("Lenders"), pursuant to a Loan Agreement dated the date hereof between
Debtor and Lenders (as the same may from time to time be amended or
supplemented, the "Loan Agreement"), and certain Promissory Notes issued in
favor of the Lenders.
The following is a recital of facts underlying this Security Agreement:
A. Debtor is simultaneously with the execution of this Security
Agreement borrowing from Lenders money (all such borrowings are collectively
referred to as the "Loan"), which Loan is being made through a bridge loan by
Lenders evidenced by promissory notes of Debtor (the "Notes") and pursuant to
the Loan Agreement. All sums that are now or hereafter become due to Lenders
pursuant to the terms of the Notes and the Loan Agreement are referred to in
this Security Agreement as the "Debt."
B. In order to induce Lenders to make the Loan, Debtor has agreed to
grant Lenders a security interest in all "Collateral," as hereafter defined.
NOW THEREFORE, the parties hereby agree as follows:
1. SECURITY INTEREST AND COLLATERAL. To secure the due payment and
performance of all indebtedness and other liabilities and obligations, whether
now existing or hereafter arising, of the Debtor to the Lenders under, arising
out of or in any way connected with the Loan Agreement and the Notes and all
instruments, agreements and documents executed, issued and delivered pursuant
thereto, including, without limitation, this Security Agreement, and to secure
any other obligations of the Debtor to the Lenders, whether now existing or
hereafter arising, all hereinafter referred to collectively as the
"Obligations," Debtor hereby assigns, mortgages, pledges, hypothecates,
transfers and sets over to the Lenders and grants to the Lenders a first lien
upon and security interest in all assets of the Debtor, including without
limitation those assets set forth, referred to, or listed on Schedule I hereto
(all hereinafter referred to as the "Collateral").
2. CONDITIONAL ASSIGNMENT. In addition to, and not by way of limitation
of, the grant of a security interest in the Collateral set forth above, Debtor
hereby, effective upon the occurrence and during the continuance of any Event of
Default, as defined herein, grants, sells, conveys, transfers, assigns and sets
over to Lenders for Lenders' benefit all Debtor's rights, title and interest in
and to the Collateral.
3. SECURED CREDITOR. Lenders shall have all the rights and remedies of
a secured creditor as provided under the Massachusetts Uniform Commercial Code
and any other applicable Uniform Commercial Codes, as set forth in the Notes and
the Loan Agreement and as provided in this Security Agreement. Debtor represents
and warrants that (i) Debtor has no place of business other than as set forth at
the beginning of this Agreement or its sales office located at 00000 Xxxx
Xxxxxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000 and (ii) Debtor has used
no other name in the operation of its business other than "Augment Systems."
Debtor agrees that Debtor will neither (y) change its place of business or
operate its business in any place other than that set forth at the beginning of
this Security Agreement nor (z) change its name or use or operate under any
other name, unless Debtor provides to Lenders notice thereof not less than ten
(10) business days before any such change, operation or use.
4. FINANCING STATEMENTS. Debtor will execute such financing statements
or other documents required under the Massachusetts Uniform Commercial Code and
any other applicable Uniform Commercial Code and the United States Patent and
Trademark Office in order to enable Lenders to perfect its security interest in
the Collateral, and Debtor will at all times and from time to time at the
request of Lenders make, execute and deliver all such additional financing
statements and other writings, including assignments, as Lenders reasonably
require to more completely vest in and assure Lenders their rights in the
Collateral pursuant to this Security Agreement. Debtor hereby appoints Lenders,
or any agent of Lenders as Debtor's attorney-in-fact with full power and
authority to execute any such financing statements or other writings for the
purposes set forth in this Section.
5. BOOKS OF ACCOUNT. Debtor will, at all reasonable times, and from
time to time, allow Lenders or any of their partners, officers, employees,
representatives, or agents, subject to maintenance of reasonable
confidentiality, to examine and inspect and make extracts from Debtor's books
and other records pertaining to the Collateral and, where accounts or contract
rights are part of the Collateral, to arrange for verification of accounts,
under reasonable procedures, directly with account debtors or by other methods.
6. NO MARSHALLING OF ASSETS. Lenders shall not be obligated to take any
steps necessary to preserve their rights in any Collateral against other persons
claiming an interest therein, but may do so at Lenders' option. At their option,
Lenders may discharge any taxes, liens, security interest, or other encumbrances
to which any Collateral is at any time subject and may, upon the failure of
Debtor to do so, purchase insurance on any Collateral and pay for the
preservation thereof, and Debtor shall reimburse Lenders on demand for any
payments made or expenses incurred by Lenders pursuant to the foregoing
authorization together with interest at the rate provided in the Notes.
7. DEFAULT. Any Event of Default as defined in the Loan Agreement shall
also constitute an "Event of Default" under this Security Agreement. Upon the
occurrence of any Event of Default and at any time thereafter:
a. Lenders may appoint an agent on their behalf ("Agent") by the
vote of a majority in interest of the principal amount of Notes, which Agent may
take control of the Collateral and any proceeds and products of Collateral to
which Lenders are entitled under this Security Agreement or under applicable
law. Agent shall have the right to endorse any checks, notes, contracts or other
instruments or documents on behalf of Debtor for the benefit of Lenders.
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b. Agent may require Debtor to assemble the Collateral and make it
available to Lenders at a place to be designated by Agent which is reasonably
convenient to the parties.
c. Agent may notify any account debtor of Debtor or obligor on an
instrument to make payment to Lenders.
d. Whenever notification with respect to the sale or other
disposition of Collateral is required by law, such notification of the time and
place of public sale, or the date after which a private sale or other intended
disposition is to be made, shall be considered reasonable if given at least five
(5) days before the time of such event.
e. Agent shall be entitled to recover from Debtor all Agent's
expenses for retaking, holding, or preparing for sale, selling or otherwise
disposing of the Collateral, including, but not limited to, Agent's reasonable
attorneys' fees and legal expenses.
f. Lenders may bid at any public or private sale and may purchase
any Collateral sold at such sale.
8. MAINTENANCE OF COLLATERAL. Debtor shall at all times keep the
Collateral within the Commonwealth of Massachusetts or State of California. The
Company will keep the Collateral in good order and repairs, subject to
reasonable wear and tear, and will not use same in violation of law or policy of
insurance thereon. The Company will maintain with financially sound and
reputable insurers insurance with respect to its properties and business against
such casualties and contingencies as shall be in accordance with general
practices of businesses engaged in similar activities in similar geographic
areas
9. RELEASE OF LENDERS. Upon payment of all of the Obligations, Lenders
shall execute any and all instruments and documents reasonably necessary and
proper to discharge and release the lien on the Collateral arising pursuant to
this Agreement.
10. MISCELLANEOUS. This Agreement may only be terminated, modified,
waived or amended by a written instrument duly executed by Debtor and Lenders
who hold more than 50% of the principal amount of the Notes. All notices given
pursuant to this Agreement shall be in writing, either delivered by hand or
first-class mail or by telecopier, to the address of the parties set forth on
EXHIBIT A hereto or to such other address as a party designates by written
notice to the other party. Lenders' rights and remedies under this Agreement,
the Notes and the Loan Agreement shall be cumulative and may be exercised
separately or concurrently. This Agreement may be assigned by Lenders, but
Debtor shall not assign this Agreement or any rights hereunder without the prior
written consent of Lenders. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York and shall be binding upon the
successors and assigns of Debtor and inure to the benefit of Lenders and their
successors, assigns and endorsees. Debtor hereby irrevocably consents to the non
exclusive jurisdiction of the Supreme Court of the State of New York, County of
New York and of the United States
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District Courts in the State of New York, Southern District of New York for all
purposes in connection with any action or proceeding arising out of or relating
to this Security Agreement, and further consents that any process or notice in
connection with any proceeding hereunder may be served (i) inside or outside the
State of New York by Registered or Certified Mail, Return Receipt Requested, and
service or notice so served shall be deemed complete five (5) days after same
shall have been posted, or (ii) such other manner as permissible under the rules
of said Courts. Within twenty (20) days after such mailing, Debtor shall appear
in answer to such process or notice of motion or other application to said
Courts, failing which Debtor shall be deemed in default and judgment may be
entered by Lenders against Debtor for the amount of the claim and other relief
requested herein. This Agreement may be signed in counterparts, each of which
shall be an original, but when taken together shall constitute one instrument.
11. USE AS FINANCING STATEMENT. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement,
even though only the original hereof contains an original signature.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first set forth above.
"Debtor"
AUGMENT SYSTEMS, INC.
By:___________________________________
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SCHEDULE I
COLLATERAL
All of Debtor's rights, title and interest in, under and to the
following (collectively, the "Collateral"):
(A) Accounts Receivable, including (i) all of Debtor's present and future
accounts, contract rights, general intangibles, chattel paper and instruments,
as such terms are defined in the Uniform Commercial Code, (ii) all of Debtor's
right, title and interest, and all of any of Debtor's rights, remedies, security
and liens, in, to and in respect of any Accounts Receivable, including, without
limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, guaranties or other contracts of suretyship with respect to Accounts
Receivable, deposits or other security for the obligation of any account debtor,
and credit and other insurance and (iii) all of any of Debtor's right, title and
interest in, to and in respect of all goods relating to, or which by sale have
resulted in, Accounts Receivable, including, without limitation, all goods,
described in invoices or other documents or instruments with respect to, or
otherwise representing or evidencing, any Account Receivable, and all returned,
reclaimed or repossessed goods; (B) Documents, including all instruments, files,
records, ledger sheets and documents covering or relating to any of the
collateral; (C) Equipment, including all of Debtor's machinery, equipment,
vehicles that are owned by Debtor, furniture and fixtures and all attachments,
accessories and equipment now or hereafter owned or acquired in Debtor's
business or used in connection therewith, and all substitutions and replacement
thereof, wherever located, whether now owned or hereafter acquired by Debtor;
(D) General Intangibles, including all of Debtor's present and future general
intangibles of every kind and description, and the goodwill of the business
symbolized thereby, including, without limitation, all patents, trademarks,
service marks, copyrights, web sites, and internet domain names and sites, and
Federal, State and local tax refund claims of all kinds due to Debtor; (E)
Inventory, including all raw materials, work in process, finished goods, and all
other inventory (as defined in the Uniform Commercial Code) of whatsoever kind
or nature, and all wrapping, packaging, advertising and shipping materials, and
any documents relating thereto, and all labels and other devices, names or marks
affixed or to be affixed hereto for purposes of selling or identifying the same
or the seller or manufacturer thereof and all of Debtor's right, title and
interest therein and thereto, wherever located, whether now owned or hereafter
acquired by debtor; (F) Cash, including drafts, acceptances, bank deposits,
deposit accounts, checking accounts, and cash now or hereafter owned by Debtor,
or in which Debtor may now have or may hereafter acquire any interest and (G)
Proceeds, including any consideration received from the sale, exchange, license,
lease or other disposition of any asset or property which constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft or other involuntary conversion of
whatever nature of any asset or property which constitutes Collateral, and shall
include, without limitation, all cash and negotiable instruments received or
held by Debtor, including, without limitation, cash and negotiable instruments
received or held, pursuant to any lockbox or similar arrangement relating to the
payment of Account Receivable.
