Exhibit 10.12
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SECURITY AGREEMENT
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The undersigned, Peritus Software Services, Inc., a Massachusetts
corporation with a place of business and executive office located at 000 Xxxxxxx
Xxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 (hereinafter referred to as a "Debtor")
hereby grants to Massachusetts Capital Resource Company, a Massachusetts special
purpose limited partnership, with a place of business at 000 Xxxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000 (hereinafter called the "Secured Party"), a security
interest in and agrees and acknowledges that Secured Party has and will continue
to have a security interest in the following:
(A) All of Debtor's inventory of whatever name, nature, kind or
description, all Debtor's goods held for sale or lease or to be furnished under
contracts of service, finished goods, work in process, raw materials, materials
used or consumed by the Debtor, parts, supplies, all wrapping, packaging,
advertising, labeling, and shipping materials, devices, names and marks, all
contract rights and documents relating to any of the foregoing, whether any of
the foregoing be now existing or hereafter arising, wherever located, now owned
or hereafter acquired by the Debtor (all of which is sometimes hereinafter
referred to as "Inventory");
(B) All of the Debtor's presently owned and hereafter acquired equipment,
machinery, furniture, fixtures and all other tangible personal property of
whatsoever kind or nature, together with all proceeds thereof, additions and
accessions thereto or replacements thereof or substitutions therefor (all of
which is sometimes hereinafter referred to as "Equipment");
(C) All of the Debtor's accounts, accounts receivable, notes, bills,
drafts, acceptances, instruments, documents, chattel paper and all other debts,
obligations and liabilities in whatever form owing to the Debtor for goods sold
by it or for services rendered by it, or however otherwise established or
created, all guaranties and security therefor, all right, title and interest of
the Debtor in the goods or services which gave rise thereto, including rights of
an unpaid seller of goods or services; whether any of the foregoing be now
existing or hereafter arising, now or hereafter received by or owing or
belonging to the Debtor (all of which are sometimes hereinafter referred to as
"Accounts");
(D) All of the Debtor's general intangibles, including without limitation,
names, goodwill, trade secrets, copyrights, trademarks, trademark applications,
tradenames, patents, patent applications, licenses, other intellectual property,
permits, governmental approvals, deposit accounts, tax refunds, claims under
insurance
policies (whether or not proceeds from Collateral), other rights to payment,
rights of setoff, choses in action, rights under judgments, computer programs
and software, contract rights, and all contracts and agreements to, or of which
it is a party or beneficiary, and all intangible personal property of whatsoever
kind or nature now owned by the Debtor as well as any and all thereof that may
be hereafter acquired and in and to all proceeds thereof;
(E) All of the Debtor's books and records, as they exist from time to
time, relating to (A) through (D) above, inclusive;
(F) All other assets of every nature and description, whether it be now
existing or hereafter arising and whether now or hereafter belonging to the
Debtor;
(all hereinafter sometimes collectively referred to as "Collateral"); to secure
the payment of all sums due or which may become due under certain Secured
Subordinated Notes, due June 30, 2002, of the Debtor in the original aggregate
principal amount of One Million Dollars ($1,000,000), such notes being issued
pursuant to a certain Note and Warrant Purchase Agreement (the "Purchase
Agreement") by and between the Debtor and Secured Party of even date herewith
(hereinafter sometimes collectively referred to as "Obligation" or
"Obligations").
I. WARRANTIES AND COVENANTS.
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The Debtor hereby warrants and covenants that:
(A) The Equipment and Inventory are used primarily for business purposes.
(B) The Equipment and Inventory of the Debtor will be kept at the Debtor's
places of business, set forth in Exhibit A attached hereto. The Debtor will
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promptly notify the Secured Party of any change in the location of the
Collateral, and the Debtor will not remove the Equipment from the locations set
forth in Exhibit A without the prior written consent of the Secured Party. The
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Debtor will notify the Secured Party, at least twenty (20) days prior to any
such event, of any change in the Debtor's exact legal name, any change in its
places of business or locations of Equipment or Inventory as set forth in
Exhibit A or its establishment of any new place of business or location of
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Equipment or Inventory or office where its records concerning Accounts and other
assets are kept.
(C) Except for (i) the security interest granted hereby and (ii) the
permitted encumbrances under Section 4.02(a) of the Purchase Agreement (the
"Permitted Encumbrances"), the Debtor is the owner of its presently owned
Collateral and will be the owner of its Collateral hereafter acquired free from
any adverse lien, security interest or encumbrance, and the Debtor will defend
the Collateral
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against the claims and demands of all persons at any time claiming the same or
any interest therein.
(D) No financing statements (other than the Permitted Encumbrances, if
any) covering any Collateral or any proceeds thereof are on file in any public
office, and at the request of Secured Party, the Debtor will join with Secured
Party in executing one or more (i) financing statements pursuant to the Uniform
Commercial Code, (ii) title certificate lien application forms; and (iii) other
documents necessary or advisable to perfect the security interests evidenced
hereby, all in form satisfactory to Secured Party and the Debtor will pay the
cost of filing the same or filing or recording this Agreement in all public
offices wherever filing or recording is deemed by Secured Party to be necessary
or desirable.
(E) The Debtor will have and maintain insurance at all times with respect
to all its Collateral against risks of fire (including so-called extended
coverage), theft, embezzlement and such other risks as Secured Party may
reasonably require containing such terms, in such form, for such periods and
written by such companies as may be reasonably satisfactory to Secured Party;
and, if requested by the Secured Party, all policies of insurance shall provide
for at least twenty (20) days' written cancellation notice to Secured Party. If
and when requested by the Secured Party, the Debtor shall furnish Secured Party
with certificates or other evidence satisfactory to Secured Party of compliance
with the foregoing insurance provision and, after an Event of Default and while
it is continuing, the Secured Party may act either in its name or as attorney
for the Debtor (for that purpose by these presents duly authorized and appointed
with full power of substitution and revocation) in obtaining, adjusting,
settling and canceling such insurance and endorsing any drafts in payment of any
loss.
(F) The Debtor will upon request made by the Secured Party render to the
Secured Party a list of all Accounts assigned hereunder and a statement
indicating the total dollar amount of the Accounts then outstanding.
(G) The only offices where the Debtor keeps records concerning any
Accounts are listed on Exhibit A and the Debtor will not remove any of such
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records from said offices without written consent of the Secured Party.
(H) The Debtor will keep its Collateral free from any adverse lien,
security interest or encumbrances except the Permitted Encumbrances, if any.
The Debtor will at all times keep accurate and complete records of its Accounts,
and the Secured Party or any of its agents shall have the right at reasonable
times and upon prior notice, to inspect the Debtor's books and records relating
to said Accounts or to any other transactions to which the Debtor is a party
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and from which an Account might arise and to make extracts from said books and
records. The Debtor shall immediately notify the Secured Party of any event
causing material loss or depreciation in value of any of its Accounts and the
amount of such loss or depreciation.
(I) If any of a Debtor's Accounts arise out of contracts with the United
States or any department, agency or instrumentality thereof, the Debtor will
immediately notify the Secured Party thereof in writing and will execute any
instruments and take any steps required by the Secured Party in order that all
monies due and to become due under such contracts shall be assigned to the
Secured Party and notice thereof given to the government under the Federal
Assignment of Claims Act. Notwithstanding the foregoing, the Secured Party
shall not request the Debtor to provide notice to the United States or any
department, agency or instrumentality thereof until an Event of Default has
occurred.
(J) Subsequent to the occurrence of any Event of Default, if any of a
Debtor's Accounts should be evidenced by promissory notes, trade acceptances or
other instruments for the payment of money, the Debtor will immediately deliver
same to the Secured Party, appropriately endorsed to the Secured Party's order
and, regardless of the form of such endorsement, such Debtor hereby waives
presentment, demand or notice of any kind with respect thereto. This Agreement
may, but need not be supplemented by separate assignments of Accounts to the
Secured Party and if such assignments are given the rights and security
interests given thereby shall be in addition to and not in limitation of the
rights and security interests given by this Agreement.
(K) The Debtor will pay promptly when due all taxes and assessments upon
its Collateral or for its use or operation or upon this Agreement or upon any
note or notes secured hereby. In its sole discretion, the Secured Party may:
(i) discharge taxes and liens levied or placed on Collateral; (ii) pay for
insurance thereon or the maintenance and preservation thereof; or (iii) if the
Debtor shall fail to make required deposits in respect of F.I.C.A. or any
withholding taxes, make such deposits or pay such taxes, in whole or in part, or
set up such reserves as the Secured Party in its sole discretion deem necessary
in respect of the Debtor's liability therefor. Any amount so paid, deposited or
reserved for shall constitute a loan for all purposes hereunder, and the Debtor
promises to repay the Secured Party such amounts upon the Secured Party's
demand. Nothing herein shall be deemed to obligate the Secured Party to do any
of the foregoing and the making of any one or more such payments; deposits or
reserves shall not constitute an agreement by the Secured Party to take any
further or similar action or a waiver of any right of the Secured Party
hereunder.
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(L) The Debtor will keep its Collateral at all times in good order and
repair, reasonable wear and tear excepted, and will make necessary renewals of
and replacements to the same with goods of equal value and serviceability, free
of all liens, security interests and encumbrances, which goods shall
automatically become subject to this Agreement.
II. ADDITIONAL RIGHTS AND ASSURANCES.
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(A) At the Secured Party's request, the Debtor at its expense will
promptly and duly execute and deliver such documents and assurances and take
such actions as may be necessary or desirable or as the Secured Party may
request in order to correct any defect, error or omission which may at any time
be discovered or to more effectively carry out the intent and purpose of this
Agreement and to establish, perfect and protect the Secured Party's security
interest, rights and remedies created or intended to be created hereunder.
(B) Subject to Article VI of this Agreement, the Secured Party will at any
time following an occurrence of an Event of Default hereunder have the right to
take physical possession of the Collateral and to maintain such possession on
the Debtor's premises or to remove the Collateral or any part thereof to such
other places as the Secured Party may desire. If the Secured Party exercises
such right, the Debtor shall at its sole expense upon the Secured Party's
request assemble the same and make it available to the Secured Party at a place
reasonably convenient to the Secured Party. If any Inventory is in the
possession or control of any of the Debtor's agents or processors, the Debtor
shall, at the Secured Party's request, notify them of the Secured Party's
security interest therein and, at the Secured Party's request, instruct them to
hold the same for the Secured Party's account and subject to the Secured Party's
instructions.
(C) The Secured Party may at any time after an occurrence of an Event of
Default (i) in its own name or in the name of others communicate with account
debtors in order to verify with them to the Secured Party's satisfaction the
existence, amount and terms of any Accounts and the absence of any reductions,
discounts, defenses or offsets with respect thereto, or (ii) notify account
debtors that Collateral has been assigned to the Security Party and that
payments by such debtors shall be made directly to the Secured Party. After an
Event of Default and while it is continuing, at the Secured Party's request, the
Debtor will notify any or all such debtors of such assignment, give instruction
and/or indicate on xxxxxxxx to such debtors that their Accounts shall be paid to
the Secured Party and/or supply such debtors with a copy of this Agreement.
(D) Subsequent to the occurrence of any Event of Default, the Secured
Party shall have full power, in its own name or that of the
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Debtor, to collect, endorse, compromise, settle, sell or otherwise deal with any
or all of the Collateral or proceeds thereof. Subsequent to the occurrence of
any Event of Default, the Debtor agrees upon request of the Secured Party to
appoint any officer or agent of the Secured Party as true and lawful
attorney-in-fact, with power of substitution, to endorse the name of the Debtor
or any of its officers, trustees or agents upon any Accounts, notes, checks,
drafts, money orders, or other instruments of payment (including under any
policy of insurance on Collateral) or Collateral that may come into possession
of the Secured Party in full or part payment of any amounts owing to Secured
Party; to sign and endorse the name of the Debtor or any of its officers,
trustees or agents upon any invoice, freight or express xxxx, xxxx of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts, and any instruments or
documents relating thereto or to the Debtor's rights therein; to give written
notice to such offices and officials of the United States Postal Service to
effect such change or changes of address so that all mail addressed to the
Debtor may be delivered directly to the Secured Party; to take any and all other
actions necessary or appropriate to collect, compromise, settle, sell or
otherwise deal with any or all of the Collateral or proceeds thereof; and to
obtain, adjust, settle and cancel any insurance; hereby granting to each said
attorney-in-fact or his substitute full power to do any and all things necessary
or appropriate to be done in and about the premises as fully and effectually as
the Debtor might or could do, and hereby ratifying all that any said
attorney-in-fact or his substitute shall lawfully do or cause to be done by
virtue hereof.
(E) The Debtor hereby assigns to the Secured Party all sums, including
without limitation return of premiums, which may become payable under any and
all of such Debtor's policies of insurance and directs each insurance company
issuing any such policy to make payment which would otherwise be due thereunder
to the Debtor directly to the Secured Party.
(F) To the extent permitted by Debtor's lease on any premises or place of
business, the Debtor hereby grants to the Secured Party, for a term commencing
on the date of the occurrence of any Event of Default and continuing as long as
any of the Obligations remain outstanding, at a rental of $1.00 for such entire
term, the right to the use of all premises or places of business which such
Debtor now or hereafter may have and where any Collateral may be located for the
purpose of protecting or enforcing the Secured Party's rights to the Collateral.
(G) In the event of the sale, exchange or disposition of any of the
Collateral (other than finished goods in the ordinary course of business) or any
interest therein (and no such sale, exchange or
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other disposition is hereby authorized or consented to), the Secured Party's
security interest shall nevertheless continue in such Collateral (including
without limitation all proceeds, cash and non-cash) notwithstanding such sale,
exchange or other disposition; and the Secured Party's receipt of any such
proceeds shall not be deemed or construed to be an authorization of or consent
to any such sale, exchange or other disposition.
(H) Any and all instruments, documents, policies and certificates of
insurance, securities, goods, accounts, choses in action, general intangibles,
chattel paper, cash, property and the proceeds thereof (whether or not the same
are Collateral or proceeds thereof) owned by the Debtor or in which the Debtor
has an interest, which now or hereafter are at any time in possession or control
of the Secured Party or any affiliate of the Secured Party or in transit by mail
or carrier to or from the Secured Party or such affiliate or in the possession
of any third party acting in its behalf, without regard to whether the Secured
Party or such affiliate received the same in pledge, for safekeeping, as agent
for collection or transmission or otherwise or had conditionally released the
same, shall constitute security for Obligations and may, after an Event of
Default and while it is continuing, be applied at any time to Obligations which
are then owing, whether due or not due.
(I) A carbon, photographic, or other reproduction of a security agreement
or a financing statement is sufficient as a financing statement to the extent
permitted under applicable law.
III. EVENTS OF DEFAULT.
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The Debtor shall be in default under this Agreement upon the happening of
any of the following events or conditions (individually and collectively an
"Event of Default"):
(A) Failure by the Debtor to observe or perform any covenant or agreement
referred to herein and, if no other grace or cure period is applicable thereto,
the continuance of such failure for fifteen (15) business days;
(B) Sale, transfer or assignment of any of the Collateral (including via
an assignment of transfer of any interest of the Debtor) (except the sale of
inventory in the ordinary course of business); loss, theft, or substantial
damage or destruction of any of the Collateral which is not fully and adequately
insured against as hereinbefore provided; or
(C) An Event of Default (as defined in the Purchase Agreement or under any
of the documents referred to therein) shall have occurred and is continuing and
such Event of Default has not been cured.
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IV. REMEDIES.
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(A) If an Event of Default occurs:
(1) The Secured Party may declare all obligations secured hereby to
be immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived.
(2) The Secured Party may exercise and shall have any and all rights
and remedies accorded it by the Massachusetts Uniform Commercial Code or the
Uniform Commercial Code as adopted in such state whose laws govern the
disposition of certain Collateral. The requirement of reasonable notice shall
be met, if notice containing such information as may be required under
applicable law is mailed, postage prepaid, to the Debtor or other person
entitled thereto at least ten (10) days (including non-business days) before the
time of sale or disposition of the Collateral. The Debtor shall pay to the
Secured Party on demand any and all expenses, including reasonable legal
expenses and reasonable attorney's fees, incurred or paid the Secured Party in
protecting or enforcing any rights of the Secured Party hereunder, including its
right to take possession of the Collateral, storing and disposing of the same or
in collecting the proceeds thereof.
(3) The Debtor designates and appoints the Secured Party its true and
lawful attorney with full power of substitution in its own name or in the name
of such Debtor to demand, collect, receive, receipt for, xxx for, compound and
give acquittance for, any and all amounts due and to become due on the Accounts
and to endorse the name of such Debtor on all commercial paper given in payment
or part-payment thereof and in its reasonable discretion to file any claim or
take any other action which the Secured Party may reasonably deem necessary or
appropriate to protect and preserve and realize upon the security interest of
the Secured Party in the Accounts or the proceeds thereof. The Secured Party
shall also have the right to (i) open all mail addressed to the Debtor; (ii)
change the Post Office box or mailing address of the Debtor; and (iii) use the
Debtor's stationery and billing forms or facsimiles thereof, for the purpose of
collecting Accounts and realizing upon the Collateral.
(B) The Debtor understands and agrees the Secured Party may exercise its
rights hereunder without affording the Debtor an opportunity for a preseizure
hearing before the Secured Party, through judicial process or otherwise, takes
possession of the Collateral upon the occurrence of an Event of Default, and the
Debtor expressly waives its constitutional right, if any, to such prior hearing.
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(C) No delay in accelerating the maturity of any obligation as aforesaid
or in taking any other action with respect to any Event of Default or in
exercising any rights with respect to the Collateral such affect the rights of
the Secured Party later to take such action with respect thereto, and no waiver
as to one Event of Default shall affect rights as to any other default.
V. MISCELLANEOUS.
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(A) The Debtor irrevocably
(1) agrees that any suit, action, or other legal proceeding arising
out of this Agreement may be brought in the courts of record of the Commonwealth
of Massachusetts or the courts of the United States located in such state;
(2) consents to the jurisdiction of each such court in any such suit;
action or proceeding; and
(3) to the extent permitted under applicable law, waives any
objection which it may have to the laying of venue of such suit, action or
proceeding in any of such courts and waives any right to a trial by jury in any
of such courts.
For such time as the Obligations shall be unpaid in whole or in part, the
Debtor irrevocably designates Xxxxxxx X. Xxxx as its agent to accept and
acknowledge on its behalf service of any and all process in any such suit,
action or proceeding brought in any such court and agree and consent that any
such service of process upon such agent and written notice of such service to
the Debtor by registered or certified mail shall be taken and held to be valid
personal service upon the Debtor whether the Debtor shall then be doing business
within the Commonwealth of Massachusetts and that any such service of process
shall be of the same force and validity as if service were made upon it
according to the laws governing the validity and requirements of such service in
such states and waives all claim of error by reason of any such service. Any
notice, process, pleadings or other papers served upon the aforesaid designated
agent shall, at the same time, be sent by certified or registered mail to the
Debtor.
(B) In case any one or more of the provisions contained herein should be
invalid, illegal or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
(C) All rights of the Secured Party hereunder shall inure to the benefit
of its successors and assigns; and all obligations of the Debtor shall bind the
successors or assigns of the Debtor. All the
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provisions of this Agreement shall be construed by and administered in
accordance with the local laws of the Commonwealth of Massachusetts. This
Agreement shall become effective when it is signed by the Debtor. The Debtor
acknowledges receipt of a copy of this Agreement.
(D) In the absence of gross negligence or willful misconduct, neither the
Secured Party nor any attorney-in-fact appointed hereunder shall be liable to
the Debtor or any other person for any act or omission, any mistake of fact or
any error of judgment in exercising any right or remedy granted herein.
VI. FIRST RIGHTS OF BANK.
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The Secured Party and the Debtor acknowledge that the Debtor has granted or
may grant a security interest to one or more holders of Senior Debt (as that
term is defined in the Purchase Agreement). Both the Secured Party and the
Debtor hereby expressly acknowledge that the security interest in the Collateral
created hereby is subordinate and junior to such security interest of the holder
or holders of such Senior Debt in the Collateral.
Signed, sealed and delivered this 30th day of May 1995.
PERITUS SOFTWARE SERVICES, INC.
By /s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx, President
Acknowledged and Accepted:
MASSACHUSETTS CAPITAL RESOURCE COMPANY
By /s/ Xxx Xxxxxx III
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Xxx Xxxxxx III, Vice President
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