MITEK SYSTEMS, INC.
SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services, Ltd.
X.X. Xxx 0000 G.T
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
Date: June 11, 2004
To Whom It May Concern:
To secure the payment of all Obligations (as hereafter defined), Mitek
Systems, Inc., a Delaware corporation (the "Assignor"), hereby assigns and
grants to Laurus Master Fund, Ltd., Cayman Islands company, a continuing
security interest in all of the following property now owned or at any time
hereafter acquired by the Assignor, or in which the Assignor now has or at any
time in the future may acquire any right, title or interest (the "Collateral"):
all cash, cash equivalents, accounts, deposit accounts (including, without
limitation, the Restricted Account (the "Restricted Account") maintained at
Commerce Bank (Account Name: Mitek Systems, Inc., Account Number: 7915474816)
referred to in the Restricted Account Agreement), accounts receivable,
inventory, equipment, goods, documents, instruments (including, without
limitation, promissory notes), contract rights, general intangibles (including,
without limitation, payment intangibles and an absolute right to license on
terms no less favorable than those currently in effect among our affiliates),
chattel paper, supporting obligations, investment property (including, without
limitation, all equity interests owned by the Assignor), letter-of-credit
rights, trademarks, trademark applications, tradestyles, patents, patent
applications, copyrights and copyright applications in which the Assignor now
has or hereafter may acquire any right, title or interest, all proceeds and
products thereof (including, without limitation, proceeds of insurance) and all
additions, accessions and substitutions thereto or therefore. In the event the
Assignor wishes to finance the acquisition of any hereafter acquired equipment
and have obtained a commitment from a financing source to finance such equipment
from an unrelated third party, Laurus agrees to release its security interest on
such hereafter acquired equipment so financed by such third party financing
source. Except as otherwise defined herein, all capitalized terms used herein
shall have the meaning provided such terms the Securities Purchase Agreement
referred to below.
The term "Obligations" as used herein shall mean and include all debts,
liabilities and obligations owing by the Assignor to Laurus arising under, out
of, or in connection with: (i) that certain Securities Purchase Agreement dated
as of the date hereof by and between the Company and Laurus (the "Securities
Purchase Agreement") and (ii) the Related Agreements referred to in the
Securities Purchase Agreement the Securities Purchase Agreement and each Related
Agreement as each may be amended, modified, restated or supplemented from time
to time, are collectively referred to herein as the "Documents"), or any
documents, instruments or agreements relating to or executed in connection with
the Documents or any documents, instruments or agreements referred to therein or
otherwise, or any other indebtedness, obligations or liabilities of the Assignor
to Laurus, whether now existing or hereafter arising, direct or indirect,
liquidated or unliquidated, absolute or contingent, due or not due and whether
under, pursuant to or evidenced by a note, agreement, guaranty, instrument or
otherwise, in each case, irrespective of the genuineness, validity, regularity
or enforceability of such Obligations, or of any instrument evidencing any of
the Obligations or of any collateral therefor or of the existence or extent of
such collateral, and irrespective of the allowability, allowance or disallowance
of any or all of the Obligations in any case commenced by or against the
Assignor under Xxxxx 00, Xxxxxx Xxxxxx Code, including, without limitation,
obligations or indebtedness of the Assignor for post-petition interest, fees,
costs and charges that would have accrued or been added to the Obligations but
for the commencement of such case.
The Assignor hereby represents, warrants and covenants to Laurus that:
it is a corporation, partnership or limited liability company,
as the case may be, validly existing, in good standing and organized
under the laws of the State of Delaware , and it will provide Laurus
thirty (30) days' prior written notice of any change in its
jurisdiction of organization;
its legal name, as set forth in its Certificate of
Incorporation (or equivalent organizational document) as amended
through the date hereof, is Mitek Systems, Inc. and it will provide
Laurus thirty (30) days' prior written notice of any change in its
legal name;
its Internal Revenue Service Employer Identification Number
(if applicable) is 00-0000000 , and it will provide Laurus thirty (30)
days' prior written notice of any change in its organizational
identification number;
it is the lawful owner of the Collateral and it has the sole
right to grant a security interest therein and will defend the
Collateral against all claims and demands of all persons and entities;
it will keep the Collateral owned by it free and clear of all
attachments, levies, taxes, liens, security interests and encumbrances
of every kind and nature ("Encumbrances"), except (i) Encumbrances
securing the Obligations and (ii) to the extent said Encumbrance does
not secure indebtedness in excess of $50,000 and such Encumbrance is
removed or otherwise released within ten (10) days of the creation
thereof;
it will at its own cost and expense keep the Collateral in
good state of repair (ordinary wear and tear excepted) and will not
waste or destroy the same or any part thereof other than ordinary
course discarding of items no longer used or useful in its business;
it will not without Laurus' prior written consent, sell,
exchange, lease or otherwise dispose of the Collateral, whether by
sale, lease or otherwise, except for the sale of inventory in the
ordinary course of business and for the disposition or transfer in the
ordinary course of business during any fiscal year of obsolete and
worn-out equipment or equipment no longer necessary for its ongoing
needs, having an aggregate fair market value of not more than $25,000
and only to the extent that:
THE PROCEEDS OF ANY SUCH DISPOSITION ARE USED TO
ACQUIRE REPLACEMENT COLLATERAL WHICH IS SUBJECT TO LAURUS'
FIRST PRIORITY PERFECTED SECURITY INTEREST OR ARE USED TO
REPAY OBLIGATIONS OR TO PAY GENERAL CORPORATE EXPENSES; AND
FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT WHICH
CONTINUES TO EXIST THE PROCEEDS OF WHICH ARE REMITTED TO
LAURUS TO BE HELD AS CASH COLLATERAL FOR THE OBLIGATIONS;
it will insure the Collateral in Laurus' name against loss or
damage by fire, theft, burglary, pilferage, loss in transit and such
other hazards as Laurus shall specify in amounts and under policies by
insurers acceptable to Laurus and all premiums thereon shall be paid by
the Assignor and the policies delivered to Laurus. If the Assignor
fails to do so, Laurus may procure such insurance and the cost thereof
shall be promptly reimbursed by the Assignor and shall constitute
Obligations;
it will at all reasonable times allow Laurus or Laurus'
representatives free access to and the right of inspection of the
Collateral;
the Assignor hereby indemnifies and saves Laurus harmless from
all loss, costs, damage, liability and/or expense, including reasonable
attorneys' fees, that Laurus may sustain or incur to enforce payment,
performance or fulfillment of any of the Obligations and/or in the
enforcement of this Security Agreement or in the prosecution or defense
of any action or proceeding either against the Assignor or Laurus
concerning any matter growing out of or in connection with this
Security Agreement, and/or any of the Obligations and/or any of the
Collateral except to the extent caused by Laurus' own gross negligence
or willful misconduct (as determined by a court of competent
jurisdiction in a final and nonappealable decision).
The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Security Agreement:
any covenant, warranty, representation or statement made or
furnished to Laurus by the Assignor or on the Assignor's behalf was
false in any material respect when made or furnished, and if subject to
cure, shall not be cured for a period of fifteen (15) days;
the loss, theft, substantial damage, destruction, sale or
encumbrance to or of any of the Collateral or the making of any levy,
seizure or attachment thereof or thereon except to the extent:
SUCH LOSS IS COVERED BY INSURANCE PROCEEDS WHICH ARE
USED TO REPLACE THE ITEM OR REPAY LAURUS; OR
SAID LEVY, SEIZURE OR ATTACHMENT DOES NOT SECURE
INDEBTEDNESS IN EXCESS OF $100,000 AND SUCH LEVY, SEIZURE OR
ATTACHMENT HAS NOT BEEN REMOVED OR OTHERWISE RELEASED WITHIN
TEN (10) DAYS OF THE CREATION OR THE ASSERTION THEREOF;
the Assignor shall become insolvent, cease operations,
dissolve, terminate our business existence, make an assignment for the
benefit of creditors, suffer the appointment of a receiver, trustee,
liquidator or custodian of all or any part of the Assignor's property;
any proceedings under any bankruptcy or insolvency law shall
be commenced by or against the Assignor and if commenced against the
Assignor shall not be dismissed within thirty (30) days;
the Assignor shall repudiate, purport to revoke or fail to
perform any of its obligations under the Note (after passage of
applicable cure period, if any); or
an Event of Default (or similar term) shall have occurred
under and as defined in the Securities Purchase Agreement or any other
Document.
Upon the occurrence of any Event of Default and at any time thereafter,
Laurus may declare all Obligations immediately due and payable and Laurus shall
have the remedies of a secured party provided in the Uniform Commercial Code as
in effect in the State of New York, this Master Security Agreement and other
applicable law. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus will have the right to take possession of the Collateral and
to maintain such possession on the Assignor's premises or to remove the
Collateral or any part thereof to such other premises as Laurus may desire. Upon
Laurus' request, the Assignor shall assemble the Collateral and make it
available to Laurus at a place designated by Laurus. If any notification of
intended disposition of any Collateral is required by law, such notification, if
mailed, shall be deemed properly and reasonably given if mailed at least ten
(10) days before such disposition, postage prepaid, addressed to the Assignor
either at the Assignor's address shown herein or at any address appearing on
Laurus' records for the Assignor. Any proceeds of any disposition of any of the
Collateral shall be applied by Laurus to the payment of all expenses in
connection with the sale of the Collateral, including reasonable attorneys' fees
and other legal expenses and disbursements and the reasonable expense of
retaking, holding, preparing for sale, selling, and the like, and any balance of
such proceeds may be applied by Laurus toward the payment of the Obligations in
such order of application as Laurus may elect, and the Assignor shall be liable
for any deficiency. For the avoidance of doubt, following the occurrence and
during the continuance of an Event of Default, Laurus shall have the immediate
right to withdraw any and all monies contained in the Restricted Account and
apply same to the repayment of the Obligations (in such order of application as
Laurus may elect).
If the Assignor defaults in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties on the
Assignor's part to be performed or fulfilled under or pursuant to this Security
Agreement, Laurus may, at its option without waiving its right to enforce this
Security Agreement according to its terms, immediately or at any time thereafter
and without notice to the Assignor, perform or fulfill the same or cause the
performance or fulfillment of the same for the Assignor's account and at the
Assignor's cost and expense, and the cost and expense thereof (including
reasonable attorneys' fees) shall be added to the Obligations and shall be
payable on demand with interest thereon at the highest rate permitted by law,
or, at Laurus' option, debited by Laurus from the Restricted Account referred to
in the Restricted Account Agreement.
The Assignor hereby appoints Laurus, any of Laurus' officers, employees
or any other person or entity whom Laurus may designate as our attorney, with
power to execute such documents in our behalf and to supply any omitted
information and correct patent errors in any documents executed by the Assignor
or on our behalf; to file financing statements against the Assignor covering the
Collateral (and, in connection with the filing of any such financing statements,
describe the Collateral as "all assets and all personal property, whether now
owned and/or hereafter acquired" (or any substantially similar variation
thereof)); to sign the Assignor's name on public records; and to do all other
things Laurus deems necessary to carry out this Security Agreement. The Assignor
hereby ratifies and approve all acts of the attorney and neither Laurus nor the
attorney will be liable for any acts of commission or omission, nor for any
error of judgment or mistake of fact or law other than their gross negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable decision). This power being coupled with an interest,
is irrevocable so long as any Obligations remains unpaid.
No delay or failure on Laurus' part in exercising any right, privilege
or option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in
writing, signed by Laurus and then only to the extent therein set forth, and no
waiver by Laurus of any default shall operate as a waiver of any other default
or of the same default on a future occasion. Laurus' books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon the Assignor for the
purpose of establishing the items therein set forth and shall constitute prima
facie proof thereof. Laurus shall have the right to enforce any one or more of
the remedies available to Laurus, successively, alternately or concurrently. The
Assignor agrees to join with Laurus in executing financing statements or other
instruments to the extent required by the Uniform Commercial Code in form
satisfactory to Laurus and in executing such other documents or instruments as
may be required or deemed necessary by Laurus for purposes of affecting or
continuing Laurus' security interest in the Collateral.
This Security Agreement shall be governed by and construed in
accordance with the laws of the State of New York and cannot be terminated
orally. All of the rights, remedies, options, privileges and elections given to
Laurus hereunder shall inure to the benefit of Laurus' successors and assigns.
The term "Laurus" as herein used shall include Laurus, any parent of Laurus, any
of Laurus' subsidiaries and any co-subsidiaries of Laurus' parent, whether now
existing or hereafter created or acquired, and all of the terms, conditions,
promises, covenants, provisions and warranties of this Security Agreement shall
inure to the benefit of each of the foregoing, and shall bind the
representatives, successors and assigns of the Assignor. Each of Laurus and the
Assignor hereby (a) waives any and all right to trial by jury in litigation
relating to this Security Agreement and the transactions contemplated hereby and
the Assignor hereby agrees not to assert any counterclaim in such litigation,
(b) submit to the nonexclusive jurisdiction of any New York State court sitting
in the borough of Manhattan, the city of New York and (c) waive any objection
the Assignor or Laurus may have as to the bringing or maintaining of such action
with any such court.
All notices from Laurus to the Assignor shall be sufficiently given if
mailed or delivered to the Assignor at its address set forth in the Securities
Purchase Agreement and the Security Agreement.
Very truly yours,
MITEK SYSTEMS, INC.
By:
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Name:
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Title:
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ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:
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Name:
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Title:
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