SECURITY AGREEMENT
May 27, 1998
A. PARTIES
1. Austost Anstalt Xxxxxx
7440 Fuerstentum
Xxxxxxxxxxx, Xxxxxxxxxxx 000
Fax: 000-000-000000000
Balmore Funds S.A.
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxx
Fax: 000-000-000-0000
Beeston Investments Ltd.
000 Xxxxxxxxxx Xxxx.
Xxx Xxxx, Xxxxxx
Fax: 000-000-00000000
Xxxxx Enterprises Ltd.
00X Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxx, XX0 0XX
Fax: 000-000-000000000
The Gross Foundation Inc.
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx
Fax: 000-000-0000
The Hewlett Fund, Inc.
0000 Xxxxxx X, #000
Xxxxxxxx, Xxx Xxxx 00000
Fax: 000-000-0000
Investcor LLC
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Fax: 000-000-0000
("Lender" or "Lenders" hereinafter)
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2. TelePad Corporation
000 Xxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
("Debtor" hereinafter)
B. AGREEMENT
Subject to the applicable terms of this Security Agreement, Debtor grants
to the Lenders, in the proportion in which their interests appear from time to
time, in the Obligation, hereinafter defined, a security interest in the
Collateral, as hereinafter defined, to secure the payment of the Obligation.
C. OBLIGATION
The following is the "Obligation" secured by this agreement:
1. Convertible promissory notes in the aggregate principal amount of
$1,000,000 issued by the Debtor to the Lenders on or about the date hereof.
2. In the event of Default, as hereinafter defined, all costs incurred
by Lender to obtain, preserve, and enforce this security interest, collect the
Obligation, and maintain and preserve the Collateral, and including (but not
limited to) taxes, assessments, reasonable attorneys' fees and legal expenses.
D. COLLATERAL
1. The security interest is granted in the following, hereinafter
called the "Collateral": All of the Debtor's tangible personal property,
including, without limitation, all present and future subsidiaries, stock,
securities, inventory, goods, merchandise, furniture, fixtures, office supplies,
motor vehicles, equipment, machinery, and associated equipment (as such terms
are defined for purposes of the Uniform Commercial Code of of the State of New
York), whether now owned or hereafter acquired; and all of the Debtor's other
personal property, including without limitation, all present and future accounts
receivable, instruments, contract rights, trademarks, trade names, copyrights,
licenses, notes, bills, drafts, acceptances, general intangibles, chooses in
action, and all debts, obligations and liabilities in whatever form, owing to
the Debtor from any person, firm or corporation or any other legal entity,
whether now existing or hereafter arising, now or hereafter received by or
belonging or owing to the Debtor, and all guaranties and securities therefor;
and any and all payments under, and proceeds of, any of the foregoing, provided
however that this Agreement shall not apply to and the term "Collateral" shall
not include any securities of L&E Computer Mounts, Incorporated (a Pennsylvania
corporation), that are the subject of Pledge and Security Agreements, or similar
agreements which Debtor is a party.
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E. AGREEMENT OF DEBTOR
1. Debtor will furnish Lender with any information on the Collateral
reasonably requested by Lender; allow Lender to inspect the Collateral, and
inspect and copy all records relating to the Collateral and the Obligation; sign
any papers furnished by Lender which are necessary to obtain and maintain this
security interest; notify Lender of any fact or circumtance warranted or
repreented by Debtor in this agreement or furnished to Lender, or if any event
of default occurs.
2. Debtor warrants, to the best of Debtor's knowledge, no financing
statement has been filed with respect to the Collateral. Debtor is absolute
owner of the Collateral, and it is not encumbered other than by this security
interest.
3. Debtor will not allow the issuance or payment of any liquidating
dividend without the prior consent of Lender.
F. RIGHTS OF LENDER
Lender may, in its discretion, after default, take any action Debtor is
required to take or is otherwise necessary to obtain, preserve, and enforce this
security interest, and maintain and preserve the Collateral, without notice to
Debtor, and add costs of same to the Obligation (but Lender is under no duty to
take any such action); release Collateral in its possession to Debtor,
temporarily or otherwise; take control of funds generated by the Collateral,
such as dividends, interest, receivables, proceeds or refunds from insurance,
and use same to reduce any part of the Obligation; waive any of its rights
hereunder without such waiver prohibiting the later exercise of the same or
similar rights; revoke any permission or waiver previously granted to Debtor.
G. MISCELLANEOUS
The rights and privileges of Lender shall inure to its successors and
assigns. All representations, warranties, and agreements to Debtor shall bind
Debtor's successors and assigns. Definitions in the Uniform Commercial Code
apply to words and phrases in this agreement. Debtor waives presentment, demand,
notice of dishonor, protest, and extension of time without notice as to any
instruments and chattel paper in the Collateral. Notice delivered via telecopier
transmission or mailed certified mail to Debtor's address in Section A, or to
Debtor's most recent changed address on file with Lender, at least three
business days prior to the related action shall be deemed reasonable. A
photographic or other reproduction of this agreement or any financing agreement
signed by Debtor, is sufficient as a financing statement.
H. DEFAULT
1. Any of the following is an event of default: failure of Debtor to
pay any part of the Obligation in accordance with its terms, or any other
liability in the Obligation, any default under
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the Obligation or failure to perform any act or duty required by this Agreement;
falsity of any warranty or representation in this agreement when made;
substantial change in any fact warranted or represented in this agreement;
involvement of Debtor in bankruptcy or insolvency proceedings; dissolution, or
other termination of Debtor's existence; merger or consolidation of Debtor with
another; substantial loss, theft, destruction, sale, reduction in value,
encumbrance of, damage to, or change in the Collateral; material modification of
any contract, the rights to which are part of the Collateral; levy on, seizure,
or attachment of the Collateral which is not contested.
2. When an event of default occurs, the entire Obligation becomes
immediately due and payable at Lender's Option without notice to Debtor, and
Lender may proceed to enforce payment of same and exercise any and all of the
rights and remedies available to a secured party under the Uniform Commercial
Code as well as all other rights and remedies.
I. FIRST AND PRIOR LIEN
This Security Agreement grants to Lender a first and prior lien to secure
the payment of the Obligation listed herein, and extensions and renewals
thereof. If Lender disposes of the Collateral following default, the proceeds of
such disposition available to satisfy the Obligation shall be applied first to
the Debentures included therein, and thereafter to all remaining indebtedness
secured hereby, in the order in which such remaining indebtedness was executed
or contracted. The lien granted herein to Lender may become subordinate to a
lien in connection with non-convertible debt financing on reasonable commercial
terms by Debtor but up to a maximum prior lien of $1,000,000 and provided Lender
has been given seven business days prior notice of such financing.
J. SUBSTANTIAL BENEFIT
Whenever possible, each provision of this Security Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Security Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remaining provisions
of this Security Agreement. Nothing in this Security Agreement or in any other
agreement between the parties shall require Debtor to pay or Lender to accept
interest in an amount which would subject Lender to penalty under applicable
law.
K. JURISDICTION
This Agreement shall, in all respects, be governed by the laws of the
State of New York without regard to New York's conflict of laws rules applicable
to agreements executed and to be wholly performed within the State of New York.
Nothing contained herein shall be construed so as to require the commission of
any act contrary to law, and wherever there is any conflict between any
provision contained herein and any present or future statute, law, ordinance or
regulation contrary to which the parties have no legal right of contract, the
latter shall prevail but the provision of this document which is affected shall
be curtailed and limited only to the extent necessary to bring it
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within the requirement of the law.
L. The Lender agrees to execute and deliver forms UCC-3 to Debtor upon full
satisfaction of the Obligation.
M. EXECUTION OF SECURITY AGREEMENT
This Agreement may be executed in any number of counterparts and by the
different signatories hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument. This Agreement may be executed by
facsimile transmission.
TELEPAD CORPORATION - Debtor
a Delaware corporation
By:________________________________
AUSTOST ANSTALT XXXXXX - Lender
By:________________________________
BEESTON INVESTMENTS LTD. - Lender
By:________________________________
THE HEWLETT FUND, INC. - Lender
By:________________________________
XXXXX ENTERPRISES LTD. - Lender
By:________________________________
THE GROSS FOUNDATION INC. - Lender
By:________________________________
BALMORE FUNDS S.A. - Lender
By:________________________________
INVESTCOR LLC - Lender
By:________________________________
