SECURITY AGREEMENT
This
Security Agreement (the “Agreement”) is made
as of December 10, 2009 by and between Mitek Systems, Inc., a Delaware
corporation (the “Debtor”), in favor of
each of the parties listed on Exhibit A hereto (each a “Secured Party,” and
collectively, the “Secured
Parties”).
RECITALS
The
Debtor and the Secured Parties are parties to a Securities Purchase Agreement of
even date with this Agreement (the “Purchase Agreement”)
pursuant to which the Secured Parties shall purchase the Debentures (as defined
in the Purchase Agreement) from the Debtor. The parties intend that
the Debtor’s obligations to repay the Debentures be secured by all of the assets
of the Debtor.
AGREEMENT
In
consideration of the purchase of the Debentures by the Secured Parties and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Debtor hereby agrees with the Secured Parties as
follows:
1. Grant of
Security Interest.
(a) To
secure the Debtor’s full and timely performance of the Obligations, the Debtor
hereby grants to the Secured Parties a continuing Lien on and security interest
(the “Security
Interest”) in, all of the Debtor’s right, title and interest in and to
all of its personal property and assets (both tangible and intangible),
including, without limitation, the following, whether now owned or hereafter
acquired and wherever located: (a) all Receivables; (b) all Equipment; (c) all
Fixtures; (d) all General Intangibles; (e) all Inventory; (f) all Investment
Property; (g) all Deposit Accounts; (h) all Cash; (i) all other Goods of the
Debtor; (j) all Intellectual Property; and (k) all Proceeds of each of the
foregoing and all accessions to, and replacements for, each of the foregoing
(collectively, the “Collateral”) provided
that, notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and Debtor shall not be deemed to have granted a security
interest in, (i) any of Debtor's rights or interests in or under, any license,
contract, permit, or franchise to which Debtor is a party or any of its rights
or interests thereunder to the extent, but only to the extent, that such a grant
would, under the terms of such license, contract, permit, or franchise, result
in a breach of the terms of, or constitute a default under, such license,
contract, permit, or franchise (other than to the extent that any such term
would be rendered ineffective pursuant to the UCC or any other applicable law or
principles of equity) or (ii) Equipment which is the subject of a purchase money
or capital lease lien, the terms of related documents for which effectively
prohibit the granting of a Lien to Secured Parties. Secured Parties
agree that that the Security Interest shall be subject to and subordinate to the
security interests in the Collateral created by secured credit facilities with
one or more commercial or financial institutions, now existing or hereafter
arising, in an amount of up to $2,000,000 million in the aggregate
(collectively, the “Senior Debt”);
provided that Debtor does not issue any of its equity securities in connection
with the creation of such Senior Debt to the lender thereof. In order
to facilitate Debtor's ability to obtain new Senior Debt (or if any holder of
Senior Debt so requests), Secured Parties agree, upon the request of Debtor: (y)
to enter into a subordination agreement acceptable to such holder of Senior
Debt, provided that such subordination is limited to subordination to loans that
do not exceed $2,000,000 in aggregate principal amount, or (z) if any holder (or
proposed holder) of Senior Debt is unwilling to permit Secured Parties to have a
junior security interest in the Collateral, Secured Parties shall terminate and
release their security interest in the Collateral; provided, however, that such
termination and release of security interest in the Collateral by the Secured
Parties shall not affect their senior position as Debenture holders to the
common stockholders of the Company.
(b) The
following terms shall have the following meanings for purposes of this
Agreement:
“Account” means any “Account,”
as such term is defined in the UCC now owned or hereafter acquired by the Debtor
or in which the Debtor now holds or hereafter acquires any interest and, in any
event, shall include, without limitation, all accounts receivable, book debts,
rights to payment and other forms of obligations (other than forms of
obligations evidenced by Chattel Paper, Documents or Instruments) now owned or
hereafter received or acquired by or belonging or owing to the Debtor whether or
not arising out of goods or software sold or services rendered by the Debtor or
from any other transaction, whether or not the same involves the sale of goods
or services by the Debtor and all of the Debtor’s rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of the Debtor’s rights to any goods represented by any of the
foregoing, and all monies due or to become due to the Debtor under all purchase
orders and contracts for the sale of goods or the performance of services or
both by the Debtor or in connection with any other transaction (whether or not
yet earned by performance on the part of the Debtor), now in existence or
hereafter occurring, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts, and all collateral security and
guarantees of any kind given by any Person with respect to any of the
foregoing.
“Cash” means all cash, money,
currency, and liquid funds, wherever held, in which the Debtor now or hereafter
acquires any right, title, or interest.
“Chattel Paper” means any
“Chattel paper,” as such term is defined in the UCC, now owned or hereafter
acquired by the Debtor or in which the Debtor now holds or hereafter acquires
any interest.
“Deposit Accounts” means
any “Deposit accounts,” as such term is defined in the UCC, and includes any
checking account, savings account, or certificate of deposit, now owned or
hereafter acquired by the Debtor or in which the Debtor now holds or hereafter
acquires any interest.
“Documents” means any
“Documents,” as such term is defined in the UCC, now owned or hereafter acquired
by the Debtor or in which the Debtor now holds or hereafter acquires any
interest.
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“Equipment” means any
“Equipment,” as such term is defined in the UCC, now owned or hereafter acquired
by the Debtor or in which the Debtor now holds or hereafter acquires any
interest and any and all additions, upgrades, substitutions and replacements of
any of the foregoing, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto, now owned or
hereafter acquired by the Debtor or in which the Debtor now holds or hereafter
acquires interest.
“Fixtures” means any
“Fixtures,” as such term is defined in the UCC, together with all right, title
and interest of the Debtor in and to all extensions, improvements, betterments,
accessions, renewals, substitutes, and replacements of, and all additions and
appurtenances to any of the foregoing property, and all conversions of the
security constituted thereby, immediately upon any acquisition or release
thereof or any such conversion, as the case may be, now owned or hereafter
acquired by the Debtor or in which the Debtor now holds or hereafter acquires
any interest.
“General Intangible” means any
“General intangible,” as such term is defined in the UCC, now owned or hereafter
acquired by the Debtor or in which the Debtor now holds or hereafter acquires
any interest and, in any event, shall include, without limitation, all right,
title and interest that the Debtor may now or hereafter have in or under any
contracts, rights to payment, payment intangibles, confidential information,
interests in partnerships, limited liability companies, corporations, joint
ventures and other business associations, permits, goodwill, claims in or under
insurance policies, including unearned premiums and premium adjustments,
uncertificated securities, deposit, checking and other bank accounts, but shall
not include any Intellectual Property (including the right to receive all
proceeds and damages therefrom), rights to receive tax refunds and other
payments and rights of indemnification.
“Goods” means any “Goods,” as
such term is defined in the UCC, now owned or hereafter acquired by the Debtor
or in which the Debtor now holds or hereafter acquires any
interest.
“Instruments” means any
“Instrument,” as such term is defined in the UCC, now owned or hereafter
acquired by the Debtor or in which the Debtor now holds or hereafter acquires
any interest.
“Intellectual Property” means,
collectively, all rights, priorities and privileges of the Debtor relating to
intellectual property, whether arising under United States, multinational or
foreign laws or otherwise, including copyrights, copyright licenses, inventions,
patents, patent licenses, trademarks, trademark licenses and trade secrets
(including customer lists), domain names, Web sites and know-how.
“Inventory” means any
“Inventory,” as such term is defined in the UCC, now owned or hereafter acquired
by the Debtor or in which the Debtor now holds or hereafter acquires any
interest, and, in any event, shall include, without limitation, all inventory,
goods and other personal property that are held by or on behalf of the Debtor
for sale or lease or are furnished or are to be furnished under a contract of
service or that constitute raw materials, work in process or materials used or
consumed or to be used or consumed in the Debtor’s business, or the processing,
packaging, promotion, delivery or shipping of the same, and all finished goods,
whether or not the same is in transit or in the constructive, actual or
exclusive possession of the Debtor or is held by others for the Debtor’s
account, including, without limitation, all goods covered by purchase orders and
contracts with suppliers and all goods billed and held by suppliers and all such
property that may be in the possession or custody of any carriers, forwarding
agents, truckers, warehousemen, vendors, selling agents or other
Persons.
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“Investment Property” means
any “Investment property,” as such term is defined in the UCC, and includes
certificated securities, uncertificated securities, money market funds and U.S.
Treasury bills or notes, now owned or hereafter acquired by the Debtor or in
which the Debtor now holds or hereafter acquires any interest.
“Letter of Credit Right” means
any “Letter of credit right,” as such term is defined in the UCC, now owned or
hereafter acquired by the Debtor or in which the Debtor now holds or hereafter
acquires any interest, including any right to payment or performance under any
letter of credit.
“Lien” means any mortgage,
deed of trust, pledge, hypothecation, assignment for security, security
interest, encumbrance, xxxx, xxxx or charge of any kind, whether voluntarily
incurred or arising by operation of law or otherwise, against any property, any
conditional sale or other title retention agreement, any lease in the nature of
a security interest, and the filing of any financing statement (other than a
precautionary financing statement with respect to a lease that is not in the
nature of a security interest) under the UCC or comparable law of any
jurisdiction.
“Obligations” shall mean and
include all loans, advances, debts, liabilities and obligations, howsoever
arising, owed by the Debtor to the Secured Parties of every kind and description
(whether or not evidenced by any note or instrument and whether or not for the
payment of money), direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising pursuant to the terms of the Purchase
Agreement and the Debentures, including without limitation all interest, fees,
charges, expenses, attorneys’ fees and accountants’ fees chargeable to the
Debtor or payable by the Debtor thereunder.
“Permitted Liens” shall mean
(a) Liens for taxes or other governmental charges not at the time delinquent or
thereafter payable without penalty or being contested in good faith, provided
that adequate reserves for the payment thereof have been established in
accordance with generally accepted accounting principals, (b) Liens of carriers,
warehousemen, mechanics, materialmen, vendors, and landlords and other similar
Liens imposed by law incurred in the ordinary course of business for sums not
overdue more than 60 days or being contested in good faith, provided that
adequate reserves for the payment thereof have been established in accordance
with generally accepted accounting principals, (c) deposits under workers’
compensation, unemployment insurance and social security laws or to secure the
performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, or to secure statutory obligations of surety or
appeal bonds or to secure indemnity, performance or other similar bonds in the
ordinary course of business, (d) zoning restrictions, easements, rights-of-way,
title irregularities and other similar encumbrances, which alone or in the
aggregate are not substantial in amount and do not materially detract from the
value of the property subject thereto or interfere with the ordinary conduct of
the business of the Debtor, (e) banker’s Liens and similar Liens (including
set-off rights) in respect of bank deposits, (f) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties and in connection with the importation of goods in the ordinary
course of the Debtor’s business, (g) Liens on the property or assets of any
subsidiary of the Debtor in favor of the Debtor, (h) purchase money Liens that
will be discharged upon the Debtor’s payment of the purchase price for the
applicable property, to the extent such Liens relate solely to the property so
purchased, (i) Liens securing Senior Debt and (j) other Liens, provided that the
aggregate amount of indebtedness secured by such other Liens does not exceed
$500,000 at any time.
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“Person” means any individual,
sole proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
public benefit corporation, other entity or government (whether federal, state,
county, city, municipal, local, foreign, or otherwise, including any
instrumentality, division, agency, body or department thereof).
“Proceeds” means “Proceeds,”
as such term is defined in the UCC and, in any event, shall include, without
limitation, (a) any and all Accounts, Chattel Paper, Instruments, cash or other
forms of money or currency or other proceeds payable to the Debtor from time to
time in respect of the Collateral, (b) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to the Debtor from time to time with
respect to any of the Collateral, (c) any and all payments (in any form
whatsoever) made or due and payable to the Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental authority
(or any Person acting under color of governmental authority), (d) the proceeds,
damages, or recovery based on any claim of the Debtor against third parties
(i) for past, present or future infringement of any copyright, patent or
patent license or (ii) for past, present or future infringement or dilution of
any trademark or trademark license or for injury to the goodwill associated with
any trademark, trademark registration or trademark licensed under any trademark
license and (e) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
“Receivables” means all of the
Debtor’s Accounts, Instruments, Documents, Chattel Paper, Supporting
Obligations, and letters of credit and Letter of Credit Rights.
“Supporting Obligation” means
any “Supporting obligation,” as such term is defined in the UCC, now owned or
hereafter acquired by the Debtor or in which the Debtor now holds or hereafter
acquires any interest.
“UCC” means the Uniform
Commercial Code as the same may, from time to time, be in effect in the State of
California; provided, that in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, Secured
Parties’ Lien on any Collateral is governed by the Uniform Commercial Code as
enacted and in effect in a jurisdiction other than the State of California, the
term “UCC” shall mean the Uniform Commercial Code as enacted and in effect, from
time to time, in such other jurisdiction solely for purposes of the provisions
thereof relating to such attachment, perfection, priority or remedies and for
purposes of definitions related to such provisions.
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Unless
otherwise defined herein, all capitalized terms used herein and defined in the
Purchase Agreement shall have the respective meaning given to those terms in the
Purchase Agreement, and terms that are defined in the UCC and used herein shall
have the meanings given to them in the UCC.
2. Agreement
Among the Secured Parties.
(a) Payment
Pro Rata. Payment to the
Secured Parties of the Obligations under the Debentures shall be made in
proportion to the principal and accrued interest then outstanding on any such
date of payment to each, until such obligations are paid or retired in
full.
(b) Sharing
of Payments. If any Secured
Party shall at any time receive any payment of principal, interest or other
charge arising under a Debenture, or upon any other obligation of Debtor or any
sums by virtue of counterclaim, offset, or other lien that may be exercised, or
from any security, other than payments made on the same date to all Secured
Parties, such Secured Party shall share such payment or payments ratably with
the other Secured Parties as to maintain as near as possible the unpaid balance
of the Obligations pro rata according to the Secured Parties’ aggregate
proportionate interests.
(c) Sharing
of Collateral.
Upon the occurrence of any Event of Default, as defined in Section 5, and if the
Secured Parties proceed to exercise any rights with respect to the Collateral,
the Secured Parties shall share the Collateral and the proceeds of such
Collateral ratably, without priority of one over the other.
(d) Appointment
of Agent. The Secured
Parties agree that Secured Parties holding two-thirds in interest of the
principal amount of Debentures outstanding may act together as the agent of all
Secured Parties to execute and deliver in their names such instruments,
documents, statements and amendments thereto as may be necessary or appropriate
to perfect or continue the perfection of the security interest granted in this
Agreement.
(e) Enforcement. Enforcement of
the Secured Parties’ rights hereunder shall be taken by Secured Parties holding
two-thirds in interest of the principal amount of Debentures outstanding acting
together as the agent for all of the Secured Parties. The action of
such percentage taken in accordance with the preceding sentence, shall in each
case bind all the Secured Parties. Each of the Secured Parties agrees
that any Secured Party acting under Sections 2(d) and 2(e) shall not be liable
for any acts taken in good faith in enforcing the rights of the Secured Parties
hereunder.
3. Representations
and Warranties. The Debtor hereby
represents and warrants to the Secured Parties that:
(a) Ownership
of Collateral. The Debtor is the
legal and beneficial owner of the Collateral (or, in the case of after-acquired
Collateral, at the time the Debtor acquires rights in the Collateral, will be
the legal and beneficial owner thereof). Except for the Security
Interest granted to the Secured Parties pursuant to this Agreement, the Debtor
has rights in or the power to transfer the Collateral free and clear of any
adverse Lien, security interest or encumbrance except as created by this
Security Interest and except for Permitted
Liens.
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(b) Valid
Security Interest. The Security
Interest granted pursuant to this Agreement will constitute a valid and
continuing security interest in favor of the Secured Parties in the Collateral
for which perfection is governed by the UCC or filing with the United States
Copyright Office or United States Patent and Trademark Office.
(c) Organization
and Good Standing. The Debtor has
been duly incorporated, and is validly existing and in good standing, under the
laws of the State of California.
(d) Location,
State of Organization and Name of the Debtor. The Debtor’s
state of organization is Delaware and the Debtor’s exact legal name as it
appears in the official filings in the State of Delaware is as set forth in the
first paragraph of this Agreement. The Debtor has only one
jurisdiction of organization.
4. Covenants. The Debtor
covenants and agrees with the Secured Parties that, from and after the date of
this Agreement until the Obligations are paid in full:
(a) Other
Liens. Except for the
Security Interest and Permitted Liens, the Debtor has rights in or the power to
transfer the Collateral and its title and will be able to do so hereafter free
from any adverse Lien, security interest or encumbrance, and the Debtor will
defend the Collateral against the claims and demands of all persons at any time
claiming the same or any interest therein.
(b) Further
Documentation. At any time and
from time to time, upon the written request of the Secured Parties, and at the
sole expense of the Debtor, the Debtor will promptly and duly authenticate and
deliver such further instruments and documents and take such further action as
the Secured Parties may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted including, without limitation, filing any financing or
continuation statements under the UCC in effect with respect to the Liens
created hereby. The Debtor also hereby authorizes the Secured Parties
to file any such financing, amendment or continuation statement without the
authentication of the Debtor to the extent permitted by applicable
law. A reproduction of this Agreement shall be sufficient as a
financing statement (or as an exhibit to a financing statement on form UCC-1)
for filing in any jurisdiction.
(c) Maintenance
of Records. The Debtor will
keep and maintain at its own expense records of the
Collateral.
(d) Inspection
Rights. The Secured
Parties shall have full access during normal business hours, and upon reasonable
prior notice, to all the books, correspondence and other records of the Debtor
relating to the Collateral.
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(e) Compliance
with Laws, etc. The Debtor (i) will comply with all laws,
rules, regulations and orders of any governmental authority applicable to
any material
portion of the Collateral or to the operation of the Debtor’s business, the
failure of which to comply with will have a material adverse effect on the
Debtor, and (ii) shall not use or permit any Collateral to be used in violation
of any provision of the Purchase Agreement and the Debentures, any law, rule or
obligation or order of any governmental authority, or any policy of insurance
covering any material portion of the Collateral, the failure of which
to comply with will have a material adverse effect on the Debtor; provided, however, that in each
case, the Debtor may contest any such law, rule, regulation or order; in any
reasonable manner which does not, in the reasonable opinion of the Debtor,
adversely affect in any material manner the Secured Parties’ rights or the
priority of its Liens on the Collateral.
(f)
Payment
of Obligations. The Debtor will
pay promptly when due all taxes, assessments and governmental charges or levies
imposed upon the Collateral or with respect to any its income or profits derived
from the Collateral, as well as all claims of any kind (including, without
limitation, claims for labor, materials and supplies) against or with respect to
the Collateral, except that no such charge need be paid if (i) the validity
of such charge is being contested in good faith by appropriate proceedings,
(ii) such proceedings do not involve any material danger of the sale,
forfeiture or loss of any of the Collateral or any interest in the Collateral
and (iii) such charge is adequately reserved against on the Debtor’s books
in accordance with generally accepted accounting principles.
(g) Limitation
on Liens on Collateral. The Debtor will
not create, incur or permit to exist, will defend the Collateral against, and
will take such other action as is reasonably necessary to remove, any Lien or
claim on or to the Collateral, other than the Security Interest and Permitted
Liens, and will defend the right, title and interest of the Secured Parties in
and to any of the Collateral against the claims and demands of all other
persons.
(h) Limitations
on Dispositions of Collateral. The Debtor will
not sell, transfer, lease, or otherwise dispose of any material portion of the
Collateral, or attempt, offer or contract to do so other than dispositions of
Collateral in the ordinary course of the Debtor’s business; provided, however that the
Debtor will be allowed to grant licenses to its products and related
documentation in the ordinary course of business and to establish or provide for
escrows of related intellectual property in connection therewith.
(i)
Further
Identification of Collateral. The Debtor will
furnish to the Secured Parties from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Secured Parties may reasonably request,
all in detail acceptable to the Secured Parties.
(j)
Notice of
Change of State of Incorporation. Without 10 days’
prior written notice to the Secured Parties, the Debtor shall not change the
Debtor’s name, state of incorporation or organization, organizational
identification number or place of business (or, if the Debtor has more than one
place of business, its chief executive office.
(k) Insurance.
The Debtor shall maintain and keep in force insurance of the types and in
amounts customarily carried from time to time during the term of this Agreement
in its lines of business.
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5. Event of
Default; the Secured Parties’ Appointment as Attorney-in-Fact.
(a) Event of
Default. For purposes of
this Agreement, the occurrence of any one of the following events (each, an
“Event of
Default”) shall constitute a default hereunder and under the
Debenture:
(i)
The Debtor’s failure to pay or discharge the
Obligations in accordance with the terms of the Debenture;
(ii)
The Debtor’s failure to observe or perform
any material covenant, obligation, condition or agreement contained in this
Agreement and such failure shall continue for 15 business days after the earlier
of (i) the Debtor’s written acknowledgement of such failure and (ii) written
notice by the Secured Parties to the Debtor of such failure.
(iii) The
commission of any act of bankruptcy by the Debtor, the execution by the Debtor
of a general assignment for the benefit of creditors, the filing by or against
the Debtor of a petition in bankruptcy or any petition for relief under the
federal bankruptcy act or the continuation of such petition without dismissal
for a period of 90 days or more, or the appointment of a receiver or trustee to
take possession of the property or assets of the Debtor.
(b) Powers. The Debtor hereby
appoints each Secured Party and any officer or agent of each such Secured Party,
with full power of substitution, as its attorney-in-fact with full irrevocable
power and authority in the place of the Debtor and in the name of the Debtor or
its own name, from time to time in the Secured Parties’ discretion so long as an
Event of Default has occurred and is continuing, for the purpose of carrying out
the terms of this Agreement, to take any appropriate action and to authenticate
any instrument which may be necessary or desirable to accomplish the purposes of
this Agreement. Without limiting the foregoing, so long as an Event
of Default has occurred and is continuing, the Secured Parties shall have the
right, without notice to, or the consent of, the Debtor, to do any of the
following on the Debtor’s behalf:
(i)
to pay or discharge any taxes or Liens
levied or placed on or threatened against the Collateral;
(ii)
to direct any party liable for any payment
under any of the Collateral to make payment of any and all amounts due or to
become due thereunder directly to the Secured Parties or as the Secured Parties
direct;
(iii) to
ask for or demand, collect, and receive payment of and receipt for, any payments
due or to become due at any time in respect of or arising out of any
Collateral;
(iv) to
commence and prosecute any suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to enforce any right in respect of any
Collateral;
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(v)
to defend any suit, action or
proceeding brought against the Debtor with respect to any
Collateral;
(vi) to
settle, compromise or adjust any suit, action or proceeding described in
subsection (v) above and to give such discharges or releases in connection
therewith as the Secured Parties may deem appropriate;
(vii)
to assign any patent right included in the Collateral of
the Debtor (along with the goodwill of the business to which any such patent
right pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Secured Parties shall in their sole
discretion determine; and
(viii) generally,
to sell, transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral and to take, at the Secured Parties’ option and
the Debtor’s expense, any actions which the Secured Parties deems necessary to
protect, preserve or realize upon the Collateral and the Secured Parties’ Liens
on the Collateral and to carry out the intent of this Agreement, in each case to
the same extent as if the Secured Parties were the absolute owner of the
Collateral for all purposes.
The
Debtor hereby ratifies whatever actions the Secured Parties shall lawfully do or
cause to be done in accordance with this Section 5. This power of
attorney shall be a power coupled with an interest and shall be
irrevocable.
(c) No Duty
on the Secured Parties’ Part. The powers
conferred on the Secured Parties by this Section 5 are solely to protect the
Secured Parties’ interests in the Collateral and shall not impose any duty upon
it to exercise any such powers. The Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither the Secured Parties nor any of their
respective officers, directors, employees or agents shall, in the absence of
willful misconduct or gross negligence, be responsible to the Debtor for any act
or failure to act pursuant to this Section 5.
6. Performance
by the Secured Parties of the Debtor’s Obligations. If the Debtor
fails to perform or comply with any of its agreements or covenants contained in
this Agreement and the Secured Parties perform or comply, or otherwise cause
performance or compliance, with such agreement or covenant in accordance with
the terms of this Agreement, then the reasonable expenses of the Secured Parties
incurred in connection with such performance or compliance shall be payable by
the Debtor to the Secured Parties within ten days of request by the Secured
Parties and shall constitute Obligations secured by this
Agreement.
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7. Remedies. If an Event of
Default has occurred and is continuing, the Secured Parties may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement relating to the Obligations, all rights and
remedies of a secured party under the UCC. Without limiting the
foregoing, the Secured Parties, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law) to or upon the Debtor or any other person (all of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances collect, receive, appropriate and realize upon any or all of the
Collateral, and/or may sell, lease, assign, give an option or options to
purchase, or otherwise dispose of and deliver any or all of the Collateral (or
contract to do any of the foregoing), in one or more parcels at a public or
private sale or sales, at any exchange, broker’s board or office of any Secured
Party or elsewhere upon such terms and conditions as the Secured Parties may
deem advisable, for cash or on credit or for future delivery without assumption
of any credit risk. The Secured Parties shall have the right upon any
such public sale or sales and, to the extent permitted by law, upon any such
private sale or sales, to purchase all or any part of the Collateral so sold,
free of any right or equity of redemption in the Debtor, which right or equity
is hereby waived or released. The Secured Parties shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable expenses incurred therein or in
connection with the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Secured Parties under this
Agreement (including, without limitation, reasonable attorneys’ fees and
expenses) to the payment in whole or in part of the Obligations, in such order
as the Secured Parties may elect, and only after such application and after the
payment by the Secured Parties of any other amount required by any provision of
law, need the Secured Parties account for the surplus, if any, to the
Debtor. To the extent permitted by applicable law, the Debtor waives
all claims, damages and demands it may acquire against the Secured Parties
arising out of the exercise by the Secured Parties of any of their respective
rights hereunder, except to the extent caused by the willful misconduct or gross
negligence of any Secured Party. If any notice of a proposed sale or
other disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least ten days before such sale or
other disposition. The Debtor shall remain liable for any deficiency
if the proceeds of any sale or other disposition of the Collateral are
insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Secured Parties to collect such
deficiency.
8. Limitation
on Duties Regarding Preservation of Collateral. Each Secured
Party’s sole duty with respect to the custody, safekeeping and preservation of
the Collateral, under Section 9207 of the UCC or otherwise, shall be to
deal with it in the same manner as such Secured Party deals with similar
property for its own account. Neither the Secured Parties nor any of
their respective directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so other than as a result of the gross negligence or
willful misconduct of the same or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Debtor or otherwise.
9. Powers
Coupled with an Interest. All
authorizations and agencies contained in this Agreement with respect to the
Collateral are irrevocable and are powers coupled with an
interest.
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10. No
Waiver; Cumulative Remedies. The Secured
Parties shall not by any act (except by a written instrument pursuant to
Section 12(a) hereof), delay, indulgence, omission or otherwise be deemed
to have waived any right or remedy hereunder or to have acquiesced in any
default under the Debenture or in any breach of any of the terms and conditions
of this Agreement. No failure to exercise, nor any delay in
exercising, on the part of the Secured Parties, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Secured Parties of any right or remedy
under this Agreement on any one occasion shall not be construed as a bar to any
right or remedy which the Secured Parties would otherwise have on any subsequent
occasion. The rights and remedies provided in this Agreement are
cumulative, may be exercised singly or concurrently and are not exclusive of any
rights or remedies provided by law.
11. Termination
of Security Interest. Upon satisfaction
of the Debtor’s obligations pursuant to the Debentures, or conversion of the
Debentures into shares of the Company’s equity securities pursuant to the terms
of the Debentures, the security interest granted herein shall terminate and all
rights to the Collateral shall revert to the Debtor. Upon any such
termination, the Secured Parties shall authenticate and deliver to the Debtor
such documents as the Debtor may reasonably request to evidence such
termination.
12. Miscellaneous.
(a) Amendments
and Waivers. Any term of this
Agreement may be amended with the written consent of the parties or their
respective successors and assigns. Any amendment or waiver effected
in accordance with this Section 12(a) shall be binding upon the parties and
their respective successors and assigns.
(b) Transfer;
Successors and Assigns. The terms and conditions
of this Agreement shall be binding upon the Debtor and its successors and
assigns, as well as all persons who become bound as a debtor to this Agreement
and inure to the benefit of the Secured Parties and its successors and
assigns. Nothing in this Agreement, express or implied, is intended
to confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided in this
Agreement.
(c) Governing
Law. This Agreement
and all acts and transactions pursuant hereto and the rights and obligations of
the parties hereto shall be governed, construed and interpreted in accordance
with the laws of the State of California, without giving effect to principles of
conflicts of law.
(d) Counterparts. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one instrument.
(e) Titles
and Subtitles. The titles and
subtitles used in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this Agreement.
(f)
Notices. Any notice
required or permitted by this Agreement shall be in writing and shall be deemed
sufficient upon receipt, when delivered personally or by courier, overnight
delivery service or confirmed facsimile, or 48 hours after being deposited in
the U.S. mail as certified or registered mail with postage prepaid, if such
notice is addressed to the party to be notified at such party’s address or
facsimile number as
set forth below or as subsequently modified by written notice.
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(g) Severability. If one or more
provisions of this Agreement are held to be unenforceable under applicable law,
the parties agree to renegotiate such provision in good faith, in order to
maintain the economic position enjoyed by each party as close as possible to
that under the provision rendered unenforceable. In the event that
the parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (i) such provision shall be excluded from this
Agreement, (ii) the balance of the Agreement shall be interpreted as if
such provision were so excluded and (iii) the balance of the Agreement
shall be enforceable in accordance with its terms.
(h) Entire
Agreement. This Agreement,
and the documents referred to herein constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof, and any and all other
written or oral agreements existing between the parties hereto concerning such
subject matter are expressly canceled.
[Signature
Page Follows]
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The
Debtor and the Secured Parties have caused this Agreement to be duly executed
and delivered as of the date first above written.
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DEBTOR:
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MITEK
SYSTEMS, INC.
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By:
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Name:
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Title:
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By:
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