Exhibit 10.1
Pursuant to Item 601(b)(2) of Regulation S-K, the exhibits and schedules to this
agreement have been omitted. Axeda Systems Inc. agrees to supplementally furnish
such exhibits and schedules upon request from the Securities and Exchange
Commission.
AXEDA SYSTEMS INC. AND CERTAIN OF ITS SUBSIDIARIES
MASTER SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o M& C Corporate Services, Ltd.
X.X. Xxx 000 X.X
Xxxxxx House
South Church Street
Grand Cayman, Cayman Islands
Date: October 5, 2004
To Whom It May Concern:
1. To secure the payment of all Obligations (as hereafter defined), Axeda
Systems Inc., a Delaware corporation (the "Company"), each of the other
undersigned parties (other than Laurus Master Fund, Ltd, "Laurus")) and each
other entity that is party to this Master Security Agreement as an assignee
(each an "Assignor" and, collectively, the "Assignors") hereby assigns and
grants to Laurus a continuing security interest in all of the following property
now owned or at any time hereafter acquired by such Assignor, or in which such
Assignor now have or at any time in the future may acquire any right, title or
interest (the "Collateral"): all cash, cash equivalents, accounts, deposit
accounts including but not limited to Lockbox Deposit Accounts (defined below),
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 current in effect among our affiliates),
chattel paper, supporting obligations, investment property (including, without
limitation, all equity interests owned by any Assignor), letter-of-credit
rights, trademarks, trademark applications, tradestyles, patents, patent
applications, copyrights, copyright applications and other intellectual property
in which any Assignor now have 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 any Assignor wishes to finance the acquisition in the
ordinary course of business 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 in the Securities Purchase Agreement referred to
below.
Notwithstanding anything herein to the contrary, in no event shall the security
interest granted herein attach to, and the Collateral shall not include (i) any
capital stock and other equity interests of foreign Subsidiaries owned by any
Assignor or any warrants, options or other rights to acquire shares of the
capital stock of such Subsidiaries domiciled outside the United States or (ii)
any license, contract or agreement to which such Assignor is a party to the
extent that the collateral assignment thereof or the creation of a security
interest therein would constitute a breach of the terms of such license,
contract or agreement, or would permit any party to such agreement to terminate
such license, contract or agreement, except the Collateral expressly shall
include any proceeds of any of the foregoing assets; provided that, any of the
agreements excluded in accordance with the foregoing shall cease to be so
excluded (x) to the extent such term is, or would be (in the case of
after-acquired property or changes to applicable law), rendered ineffective
under Sections 9-406, 9-407, 9-408 or 9-409 of the UCC of
any relevant jurisdiction (or any successor provision) or any other applicable
law or principles of equity; or (y) if such Assignor has obtained all of the
consents of the other parties to such license, contract or agreement necessary
for the collateral assignment of, or creation of a security interest in, such
license, contract or agreement; provided further that, immediately upon the
ineffectiveness, lapse or termination of any such term in any such license,
contract or agreement, the Collateral shall include, and such Assignor shall be
deemed to have granted a security interest in, all such rights and interests as
if such provision had never been in effect.
2. The term "Obligations" as used herein shall mean and include all debts,
liabilities and obligations owing by each 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 Agreementas each may be amended, modified, restated or supplemented from
time to time, are collectively referred to herein as the "Documents"), and in
connection with 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, and in connection with any other indebtedness,
obligations or liabilities of any 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 any Assignor under Xxxxx 00, Xxxxxx Xxxxxx
Code, including, without limitation, obligations or indebtedness of each
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.
Notwithstanding anything herein to the contrary, the Obligations shall not
include any liabilities or obligations that are not payment obligations or that
arise under or out of the Warrants or any other equity interests of the Company
issued to Laurus.
3. Each Assignor hereby jointly and severally represents, warrants and
covenants to Laurus that:
(a) it is a corporation, partnership or limited liability company, as
the case may be, validly existing, in good standing and organized under the
respective laws of its jurisdiction of organization set forth on Schedule
A, and each Assignor will provide Laurus thirty (30) days' prior written
notice of any change in any of its respective jurisdiction of organization;
(b) its legal name is as set forth in its respective Certificate of
Incorporation or other organizational document (as applicable) as amended
through the date hereof and as set forth on Schedule A, and it will provide
Laurus thirty (30) days' prior written notice of any change in its legal
name;
(c) its organizational identification number (if applicable) is as set
forth on Schedule A hereto, and it will provide Laurus thirty (30) days'
prior written notice of any change in any of its organizational
identification number;
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(d) it is the lawful owner of the respective 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 in
all material respects;
(e) it will keep its respective Collateral 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) Permitted Encumbrances. For purposes hereof,
Permitted Encumbrances means: (i) liens for taxes, assessments or
governmental charges or claims the payment of which is not, at the time,
required by the Securities Purchase Agreement; (ii) statutory liens of
landlords, liens of collecting banks under the UCC on items in the course
of collection, statutory liens and rights of set-off of banks, statutory
liens of carriers, warehousemen, mechanics, repairmen, workmen and
materialmen, and other Liens imposed by law, in each case incurred in the
ordinary course of business (a) for amounts not yet overdue or (b) for
amounts that are overdue and that (in the case of any such amounts overdue
for a period in excess of 5 days) are being contested in good faith by
appropriate proceedings, so long as such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall have been made for
any such contested amounts; (iii) deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
statutory obligations, bids, leases, government contracts, trade contracts
and other similar obligations (exclusive of obligations for the payment of
borrowed money); (iv) any attachment or judgment lien not otherwise
constituting an Event of Default; (v) licenses (with respect to
Intellectual Property and other property), leases or subleases granted to
third parties and not interfering in any material respect with the ordinary
conduct of the business of Company or any of its Subsidiaries; (vi)
easements, rights-of-way, restrictions, encroachments, and other minor
defects or irregularities in title, in each case which do not and will not
interfere in any material respect with the ordinary conduct of the business
of Company or any of its Subsidiaries; (vii) any (a) interest or title of a
lessor or sublessor under any lease not prohibited by this Agreement, (b)
lien or restriction that the interest or title of such lessor or sublessor
may be subject to, or (c) subordination of the interest of the lessee or
sublessee under such lease to any lien or restriction referred to in the
preceding clause (b), so long as the holder of such lien or restriction
agrees to recognize the rights of such lessee or sublessee under such
lease; (viii) liens arising from filing UCC financing statements relating
solely to leases not prohibited by this Agreement and liens arising from
purchase money indebtedness or capital leases permitted under this
Agreement or the Securities Purchase Agreement; (ix) liens in favor of
customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods; (x)
any zoning or similar law or right reserved to or vested in any government
authority office or agency to control or regulate the use of any real
property; and (xi) liens securing obligations (other than obligations
representing Indebtedness for borrowed money) under operating, reciprocal
easement or similar agreements entered into in the ordinary course of
business of Company and its Subsidiaries. ;
(f) it will, at its and the other Assignors joint and several cost and
expense keep the Collateral in good state of repair in all material
respects (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 or such other Assignors' business;
(g) it will not without Laurus' prior written consent (which consent
shall not be unreasonably be withheld), so long as twenty-five percent
(25%) of the principal amount of the Note is outstanding, sell, exchange,
lease or otherwise dispose of the Collateral, whether by
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sale, lease or otherwise, except for (i) the sale of inventory in the
ordinary course of business and, (ii) the granting or other disposition of
non-exclusive licenses of its software and other intellectual and related
property in the ordinary course of business, (iii) other transactions
permitted by Section 6.12 of the Securities Purchase Agreement, (iv) 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 $100,000 in any fiscal year and only to the extent that the
proceeds of any such equipment disposition are used to acquire replacement
Collateral which is subject to Laurus' first priority perfected security
interests (subject to Permitted Encumbrances), or are used to repay
Obligations or to pay general corporate expenses, and (v) dispositions of
assets to the extent that not less than seventy five percent (75%) of the
net proceeds thereof are applied to repay the Obligations and the balance
of such net proceeds are applied in all ordinance with clause (iv) above;
(h) it will insure or cause the Collateral to be insured as further
provided in Section 6.8 of the Securities Purchase Agreement. If any such
Assignor fails to do so, Laurus may procure such insurance and the cost
thereof shall be promptly reimbursed by the Assignors, jointly and
severally, and shall constitute Obligations;
(i) it will at all reasonable times allow Laurus or Laurus'
representatives free access to and the right of inspection of the
Collateral;
(j) such Assignor (jointly and severally with each other 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 Master Security
Agreement or in the prosecution or defense of any action or proceeding
either against Laurus or any Assignor concerning any matter growing out of
or in connection with this Master 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).
(k) On or prior to the 30th day following the Closing Date, the
Assignor will (x) irrevocably direct all of its present and future Account
Debtors (as defined below) and other persons obligated to make payments
constituting Collateral to make such payments directly to the lockboxes
maintained by the Assignor (the "Lockboxes") with Commerce Bank or such
other financial institution accepted by Laurus in writing as may be
selected by the Company (the "Lockbox Bank") (each such direction pursuant
to this clause (x), a "Direction Notice") and (y) promptly provide Laurus
with copies of each Direction Notice it being understood that assignor will
exercise commercially reasonable effort to have each account debtor
acknowledge each respective direction notice. Upon receipt of such
payments, the Lockbox Bank has agreed to deposit the proceeds of such
payments in that certain deposit account maintained at the Lockbox Bank and
evidenced by the account name of the Assignor and the account number of
__________, or such other deposit accepted by Laurus in writing (the
"Lockbox Deposit Account"). On or prior to the Closing Date, the Company
shall and shall cause the Lockbox Bank to enter into all such documentation
acceptable to Laurus pursuant to which, among other things, the Lockbox
Bank agrees to, following notification by Laurus (which notification Laurus
shall only give following the occurrence and during the continuance of an
Event of Default), comply only with the instructions or other directions of
Laurus concerning the Lockbox and the Lockbox Deposit Account. All of the
Assignor's invoices, account statements
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and other written or oral communications directing, instructing, demanding
or requesting payment of any Account of the Assignor or any other amount
constituting Collateral shall conspicuously direct that all payments be
made to the Lockbox or such other address as Laurus may direct in writing.
If, notwithstanding the instructions to Account Debtors, the Assignor
receives any payments, the Assignor shall immediately remit such payments
to the Lockbox Deposit Account in their original form with all necessary
endorsements. Until so remitted, the Assignor shall hold all such payments
in trust for and as the property of Laurus and shall not commingle such
payments with any of its other funds or property. For the purpose of this
Master Security Agreement, (x) "Accounts" shall mean all "accounts", as
such term is defined in the Uniform Commercial Code as in effect in the
State of New York on the date hereof, now owned or hereafter acquired by
the Assignor and (y) "Account Debtor" shall mean any person or entity who
is or may be obligated with respect to, or on account of, an Account.
4. The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Master Security Agreement:
(a) Breach of any covenant, warranty, representation or statement made
or furnished to Laurus by any Assignor or on any Assignor's benefit was
false or misleading in any material respect when made or furnished, and if
subject to cure, shall not be cured for a period of thirty (30) days after
the occurrence thereof;
(b) 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 permitted
hereunder or that any such event could not reasonably be expected to have a
Material Adverse Effect (as defined in the Securities Purchase Agreement)
or :
(i) such loss is covered by insurance proceeds which are used to
replace the item or repay Laurus; or
(ii) 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;
(b) any 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 Assignors' property, except to the extent
permitted hereunder or under the Securities Purchase Agreement;
(c) any proceedings under any bankruptcy or insolvency law shall be
commenced by or against any Assignor and if commenced against any Assignor
shall not be dismissed within sixty (60) days;
(d) the Company shall repudiate, purport to revoke or fail to perform
any or all of its obligations under any Note (after passage of applicable
cure period, if any); or
(e) an Event of Default shall have occurred and be continuing under
and as defined in any Document.
5. Upon the occurrence and during the continuance of any Event of Default,
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 Agreement
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and other applicable law. Upon the occurrence and during the continuance of any
Event of Default, Laurus will have the right to take possession of the
Collateral and to maintain such possession on our premises or to remove the
Collateral or any part thereof to such other premises as Laurus may desire
subject to applicable law. Upon Laurus' request, each of the Assignors shall
assemble or cause the Collateral to be assembled 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 any Assignor either at such
Assignor's address shown herein or as set forth in the Securities Purchase
Agreement. 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 each Assignor shall be liable for any deficiency.
6. If any Assignor defaults in the performance or fulfillment of any of the
terms, conditions, promises, covenants, provisions or warranties on such
Assignor's part to be performed or fulfilled under or pursuant to this Master
Security Agreement, Laurus may, at its option without waiving its right to
enforce this Master Security Agreement according to its terms, immediately or at
any time thereafter and without notice to any Assignor, perform or fulfill the
same or cause the performance or fulfillment of the same for each Assignor's
joint and several account and at each Assignor's joint and several 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 interest rate then applicable under the Note .
7. Each Assignor 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 each of our behalf and to supply any omitted
information and correct patent errors in any documents executed by any Assignor
or on any Assignor's behalf; to file financing statements against us 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 our name on public records; and to do all other
things Laurus deem necessary to carry out this Master Security Agreement. Each
Assignor hereby ratifies and approves 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 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. Upon
the payment in full of all Obligations arising in connection with the Note, this
Agreement and the security interest granted hereby shall terminate and all
rights to the Collateral shall revert to the applicable Assignors. Upon any such
termination Laurus will, at Assignors' expense, execute and deliver to Assignors
such documents as Assignors shall reasonably request to evidence such
termination. In addition, upon the proposed sale or other disposition of any
Collateral by an Assignor that is not otherwise prohibited hereunder or by the
Securities Purchase Agreement for which such Assignors desires a security
interest release from Laurus, shall grant such release at Assignors' expense. In
furtherance but not in limitation of the foregoing, in the event that any
Assignor (other than the Company), is liquidated or dissolved or such Assignor
(other than the Company) is no longer a direct or indirect subsidiary of the
Company as a result of a transaction permitted by the Securities Purchase
Agreement, then the obligations of such Assignor under this Agreement shall
terminate and be of no further force or effect and Laurus will, at Assignors'
expense,
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execute and deliver to Assignors such documents as any Assignor shall reasonably
request to evidence such termination.
8. 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 each 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. Each 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.
No amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by any Assignor therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
holders of more than 50% of the aggregate outstanding principal amount of the
Notes and, in the case of any such amendment or modification, by Assignors. Any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given.
9. This Master 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 Agreement shall inure to
the benefit of each of the foregoing, and shall bind the representatives,
successors and assigns of each Assignor. Laurus and each Assignor hereby (a)
waive any and all right to trial by jury in litigation relating to this
Agreement and the transactions contemplated hereby and each Assignor 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 Laurus or each Assignor may
have as to the bringing or maintaining of such action with any such court.
10. All notices from Laurus to any Assignor shall be sufficiently given if
mailed or delivered to such Assignor's address set forth below.
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Very truly yours,
AXEDA SYSTEMS INC.
By: /s/ Xxxxxx X. Xxxxxxx Xx.
-------------------------------
Name: Xxxxxx X. Xxxxxxx Xx.
Title: Chief Executive Officer
Address: 00 Xxxxxx Xxxx, Xxxxxxxxx XX 00000
AXEDA SYSTEMS OPERATING COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxxxx Xx.
--------------------------
Name: Xxxxxx X. Xxxxxxx Xx.
Title: Chief Executive Officer
Address: 00 Xxxxxx Xxxx, Xxxxxxxxx XX 00000
LIUCO, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
Address: 00 Xxxxxx Xxxx, Xxxxxxxxx XX 00000
RAVISENT OPERATING COMPANY INC.
By: /s/ Xxxxxx X. Xxxxxxx Xx.
--------------------------
Name: Xxxxxx X. Xxxxxxx Xx.
Title: Chief Executive Officer
Address: 00 Xxxxxx Xxxx, Xxxxxxxxx XX 00000
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AXEDA IP, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
Address: 00 Xxxxxx Xxxx, Xxxxxxxxx XX 00000
ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By: /s/ Xxxxx Grin
-----------------------
Name: Xxxxx Grin
Title: Fund Manager
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