SECURITY AGREEMENT
This
Security Agreement is entered into this 21th day
of May , 2010, by and between Vuzix Corporation, a Delaware corporation, with an
address at 00 Xxxx Xxxxxx Xxxxx, Xxxxxxxxx, XX 00000 (the "Debtor") and Kopin
Corporation, a Delaware Corporation having an address at 000 Xxxx Xxxxxxx Xxxx,
Xxxxxxx, Xxxxxxxxxxxxx 00000( the "Secured
Party").
ARTICLE
I
DEFINITIONS
All words
and terms used in this Agreement shall have the meanings as set forth in the
following Sections; and where not otherwise defined herein, they shall be deemed
to have the meanings accorded to them in the New York Uniform Commercial Code,
as amended from time to time (the "UCC").
Section
1.1 "Agreement"
shall mean this Security Agreement and all documents and instruments executed
and delivered in conjunction herewith.
Section
1.2 "Collateral"
shall mean the property subject to the security interest created by this
Agreement, being all of the Debtor's personal property of every kind and nature
and wherever located, now owned or hereafter acquired, and the proceeds thereof,
as follows:
(a) All
of Debtor's Accounts (as defined in Section 9-106 of the UCC) whether secured or
unsecured, now existing or hereafter acquired, and the proceeds thereof (the
"Accounts");
(b) All
of Debtor's Instruments (as defined in Section 9-105(1)(i) of the UCC), now
owned or hereafter acquired and the proceeds thereof;
(c) All
of Debtor's Chattel Paper (as defined in Section 9-105(1)(b) of the UCC), now
owned or hereafter acquired and the proceeds thereof;
(d) All
of Debtor's General Intangibles (as defined in Section 9-106 of the UCC), now
owned or hereafter acquired, and the proceeds thereof (the "General
Intangibles");
(e) All
of Debtor's Inventory (as defined in Section 9-109(4) of the UCC), now existing
or hereafter acquired and the proceeds thereof (the "Inventory");
(f) All
of Debtor's Equipment (as defined in Section 9-109(2) of the UCC), all
attachments, accessories, parts or tooling related thereto and all replacements
for the foregoing, in each case now existing or hereafter acquired, and the
proceeds thereof (the "Equipment");
(g) All
of Debtor's Insurance with respect to the Inventory, General Intangibles,
Fixtures, Equipment, Goods and other Collateral against risks of fire, theft or
any other physical damage or loss, now owned or hereafter acquired and the
proceeds thereof, and all insurance insuring the payment of Accounts, now owned
or hereafter acquired, and the proceeds thereof (collectively, the
"Insurance");
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(h) All
goodwill, trade names, trademarks, trade secrets, know-how, inventions, patents,
patent applications, copyrights and other intellectual property now owned or
hereafter acquired by Debtor, or any rights of Debtor with respect to any of the
foregoing, whether or not any of the same are covered in other categories of
this Section 1.2, and the proceeds thereof;
(i)
All of Debtor's Documents of Title (as defined in Section 1-201-(15)
of the UCC), now existing or hereafter acquired, and the proceeds
thereof;
(j)
All of Debtor's Goods (as defined in Section 2-105(1) of the UCC),
now owned or hereafter acquired, whether or not any of the same are covered in
other categories of this Section 1.2, and the proceeds thereof (the
"Goods");
(k) All
of Debtor's Fixtures (as described in Section 9-313 of the UCC), now existing or
hereafter acquired and the proceeds thereof (the "Fixtures");
(l)
All of Debtor’s Investment Property (as defined in Section
9-115 of the UCC), now owned or hereafter acquired, and all proceeds and General
Intangibles arising therefrom (the "Investment Property");
(m) All
of Debtor's right, title and interest in all of its books, records, ledger
sheets, files and other data and documents, now owned or hereafter existing,
relating to any of the items listed in Sections (a) through (l)
above;
(n) All
of Debtor's rights as a seller of goods under Article 2 of the UCC with respect
to the Inventory, and as to goods represented by or securing any of the
Accounts, all Debtor's rights therein including, without limitation, rights of
stoppage in transit, replevin and reclamation;
(o) All
guarantees, mortgages or real or personal property leases or other agreements or
property securing or relating to any of the items referred to above, or acquired
for the purpose of securing and enforcing any of such items; and
(p) All
sums at any time standing to Debtor's credit on Secured Party's books, and all
moneys, securities and other property of Debtor at any time in Secured Party's
possession or in which Secured Party has a lien or security interest, and all
proceeds thereof.
Section
1.3 "Obligation"
shall mean any and all liabilities and obligations of the Debtor to the Secured
Party pursuant to or represented by a Secured Promissory Note (the "Note") of
even date herewith, issued to Secured Party pursuant to a Revolving Line of
Credit Trade Agreement between Debtor and Secured Party, also of even date
herewith.
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ARTICLE
II
SECURITY
INTEREST
As
security for the payment of the Obligation, the Debtor hereby grants to Secured
Party a security interest in the Collateral.
ARTICLE
III
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE DEBTOR
The
Debtor represents, warrants and covenants, and shall be deemed to do so
continually as long as this Agreement shall remain in force, that:
Section
3.1 Ownership of
Collateral. It is the owner of the Collateral, with good,
marketable and indefeasible title thereto, free of all liens, security
interests, claims, liabilities, mortgages, leases, pledges, encumbrances,
restrictions, charges or imperfections of title whatsoever, except for the
security interest of the Secured Party and as otherwise indicated on Schedule
A.
Section
3.2 Authority. The
Debtor is authorized to enter into and implement this Agreement and has taken
all necessary actions, corporate or otherwise, in relation to such
authorization.
Section
3.3 Maintenance of
Collateral. The Debtor shall continually take such steps as
may be necessary and prudent to protect the interest of Secured Party in the
Collateral including, but not limited to the following:
(a) Maintain
and records relating to the Collateral and allow Secured Party or its
representatives access to such records and the Collateral at all reasonable
times for the purpose of examination, verification, copying, extracting and
other reasonable purposes as Secured Party may require;
(b) Execute
and deliver to Secured Party such financing statements and/or other and further
documentation as Secured Party may deem reasonably necessary or advisable in
order to evidence, effectuate or perfect its security interest in the
Collateral;
(c) Defend
the Collateral against all claims and demands of third parties at any time
claiming the same or any interest therein, except buyers of Inventory in the
ordinary course of the Debtor's business; provided, however, that the Debtor may
grant security interests in some or all of the Collateral in order to secure the
payment of Senior Debt, as such term is defined in Section 6.1;
(d) Not
without prior written consent of Secured Party sell, transfer or otherwise
dispose of the Collateral or any interest therein, in bulk or otherwise, except
for (i) the sale of Inventory in the ordinary course of business, (ii) the
granting of security interests to secure the repayment of Senior Debt, as such
term is defined in Section 6.1 and (iii) the factoring of accounts receivable
for the purpose of obtaining funds for use in the ordinary course of Debtor’s
business;
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(e) Notify
Secured Party in the event of material loss or damage to the Collateral or of
any material adverse change in the Debtor's business or the Collateral, or of
any other occurrences which could materially and adversely affect the security
of Secured Party;
(f)
Pay all expenses incurred in the manufacture, delivery,
storage or other handling of the Collateral and all taxes which are or may
become a lien on the Collateral, promptly when due, and in any event reimburse
Secured Party, on demand, for any expenses which she might incur in satisfying
such expenses or taxes; and
(g) Maintain
insurance on the Collateral of such types, coverage, form and amount as is
usually carried on similar property by similar enterprises and shall supply
Secured Party with certificates as to the continuance of such insurance, at its
request. All such insurance shall be payable to Secured Party and the
Debtor as their interests shall appear. Insurance proceeds received
by Secured Party shall be applied by its against the Obligations, whether or not
then due. Debtor shall timely make, file, settle and adjust all
claims under all such insurance, provided, that Secured Party shall have the
right at its election, to do so directly or to direct the Debtor in taking such
action.
Section
3.6 Reimbursement to Secured
Party. All expenses of Debtor paid by Secured Party pursuant
to paragraphs (f) or (g) of Section 3.5 shall be reimbursed by Debtor on demand,
shall be Obligations secured hereby, and shall bear interest, payable on demand,
from the date of Secured Party's payment of such expenses until payment in full
is made by Debtor, at the highest rate charged from time to time on the
Obligation.
ARTICLE
IV
EVENTS OF
DEFAULT
Any of
the following events or occurrences shall constitute an "event of default" under
this Agreement:
(a) The
failure to pay when due any amount due under the Obligation, whether upon
demand, at maturity, by acceleration or otherwise; or the occurrence of an Event
of Default as specified in the Note.
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(b) The
attachment or restraint of any of the Collateral or the same being subject at
any time to any mandatory court order or other legal process;
(c) The
failure of the Debtor to perform its duties as specified in, or the breach of
any representation, warranty or covenant contained in or made pursuant to, this
Agreement;
(d) The
failure in business, dissolution or termination of the existence of the
Debtor;
(e) Any
petition in bankruptcy being filed by or against the Debtor, or any proceedings
in bankruptcy or under any law relating to the relief of debtors, being
commenced for the relief or readjustment of any indebtedness of the Debtor,
either through reorganization, composition, extension or otherwise; provided
that, in the case of a petition or proceeding being commenced against the
Debtor, it shall not have been dismissed within sixty (60) days of being filed
or commenced.;
(f) The
making by the Debtor of an assignment for the benefit of creditors, or the
taking advantage by Debtor of any insolvency law;
(g) The
appointment of any receiver of any property of the Debtor; or
(h)
The failure of the Debtor to perform its duties as specified in, or the breach
of any representation, warranty or covenant contained in or made pursuant to, or
any default, Event of Default or event which, with notice or lapse of time or
both would constitute a default or Event of Default under, (i) any agreement,
document or instrument evidencing or representing the Obligation, or (ii) any
agreement, document, instrument, mortgage or guaranty executed in connection
with or in any way securing or related to the Obligation.
ARTICLE
V
RIGHTS OF SECURED
PARTY
Section
5.1 General
Rights. The rights of Secured Party shall at all times be
those of a secured party under the New York UCC in addition to and not in
limitation of the rights provided under this Security
Agreement.
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ARTICLE
VI
SUBORDINATION
Section
6.1 (a) The
security interest granted by this Agreement shall be and hereby is subordinated
to any security interest granted in respect of Senior Debt and in respect of
those obligations listed on Schedule A, until the full and final payment in cash
of all such Senior Debt, whether now or hereafter incurred or owed by Debtor and
all of those obligations listed on Schedule A. Secured Party will not
take or omit to take any action or assert any claim with respect to the
Collateral which is inconsistent with the provisions of this Section
6.1. Without limiting the foregoing, Secured Party will not take any
action to foreclose or realize upon the Collateral or any part thereof except in
connection with any action to foreclose or realize upon the Collateral by the
holder of any Senior Debt but subject, in such event, to the payment of or
satisfaction of the Senior Debt, or as may be permitted with the consent of the
holders of all Senior Debt. "Senior Debt" means all principal,
interest, fees, costs, enforcement expenses (including legal fees and
disbursements), collateral protection expenses and other reimbursement or
indemnity obligations created in favor of any lender to the Debtor in respect of
money borrowed by the Debtor from such lender for use in the ordinary course of
its business.
(b) The
security interest granted by this Agreement shall be and hereby is declared to
be pari passu with any
security interest granted by the Debtor in all or any part of the Collateral to
any trade creditor of Debtor to secure the payment of the purchase price of
goods or services provided by such trade creditor to the Debtor in the ordinary
course of the Debtor’s business, and the Secured Party agrees to share its
security interest in and the proceeds of any Collateral with any such trade
creditor in proportion to the amount of the obligation of Debtor to Secured
Party and all such trade creditors.
ARTICLE
VI
MISCELLANEOUS
Section
7.1 Waivers. The
Debtor expressly waives notice of nonpayment, demand, presentment, protest or
notice of protest in relation to the Obligations or the
Collateral. No delay or omission of Secured Party in exercising or
enforcing any of its rights, powers, privileges, options or remedies under this
Agreement shall constitute a waiver thereof, and no waiver by Secured Party of
any default by the Debtor shall operate as a waiver of any other
default. This Agreement constitutes the entire agreement between the
Debtor and Secured Party with respect to the security interest created and
supersedes all prior written or oral communications or understandings with
respect to the subject matter hereof. No term or provision of this
Agreement shall be waived, altered or modified except by written amendment
signed by the parties. All rights and remedies of Secured Party under
this Agreement shall be cumulative and not alternative or exclusive, may be
exercised by Secured Party at such time or times and in such order as Secured
Party, in its sole discretion, may determine, and are for the sole benefit of
Secured Party. The exercise or failure to exercise such rights and
remedies shall not result in liability to the Debtor or others except in the
event of willful misconduct or bad faith by Secured Party, and in no event shall
Secured Party be liable for more than it actually receives as a result of the
exercise or failure to exercise such rights and remedies.
Section
7.2 Successors and
Survival. This Agreement shall be binding upon and shall inure
to the benefit of the respective parties, their successors and assigns, and
shall remain in force and effect until terminated by written agreement of the
parties. All representations, warranties and covenants shall survive
the execution hereof.
Section
7.3 Notices. Any
notices under or pursuant to this Agreement shall be in writing and shall be
delivered personally, or sent by registered or certified mail to the address of
the parties as set forth above or to such other address as each Party may
designate to the other from time to time. Notices to the Debtor shall
be effective when received or receipted for or three (3) days following mailing,
whichever is sooner.
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Section
7.4 Headings. The
headings of Articles and Sections in this Agreement are for convenience
only. They form no part of this Agreement and shall not affect its
interpretation.
Section
7.5 Severability. If
any provision of this Agreement shall be or become illegal or unenforceable in
whole or in part for any reason whatsoever, the remaining provisions shall
nevertheless be deemed valid, binding and subsisting.
Section
7.6 Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly within New York State, without giving effect to
conflict of laws principles.
IN
WITNESS WHEREOF, this Agreement has been executed as of the day and year first
above written.
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Vuzix
Corporation
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By:
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/s/ Xxxx Xxxxxxx
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Name:
Xxxx Xxxxxxx
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Title:
President
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Kopin
Corporation
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By:
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/s/ Xxxx C. C. Fan
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Name:
Xxxx C. C. Fan
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Title:
Chief Executive
Officer
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STATE OF
NEW YORK
COUNTY OF
MONROE SS.:
On the
_____ day of May, 2010, before me, personally appeared Xxxx Xxxxxxx personally
known to me or proved to me on the basis of satisfactory evidence to be the
individuals whose name is subscribed to the within instrument and acknowledged
to me that he executed the same in his capacity, and that by his signature on
the instrument, the individual, or the person upon behalf of which the
individual acted, executed the instrument.
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Notary
Public
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SCHEDULE
A
PRIOR SECURITY
INTERESTS
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·
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Loan
Payable to Bank of America -
$100,000
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·
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Loan
Payable to XX Xxxxxx Chase -
$112,500
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·
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Note
Payable to Xxxx Xxxxxxx - $209,208
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·
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Note
Payable to Xxxx Xxxxxxx – $215,500
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·
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Note
Payable to Xxxxx Xxxxxxx - $100,000
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·
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Note
Payable to Xxxx Xxxxxx - $75,000
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·
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Note
Payable to Xxxxxxx Xxxxxxxx -
$50,000
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·
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Note
Payable to Xxxxx Xxxxxxx - $123,718
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·
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Note
Payable to Vast Corporation -
$1,000,000
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·
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Note
Payable to Kopin Corporation -
$746,500
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·
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End
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SCHEDULE A TO UCC-1
FINANCING STATEMENT
All of
the Debtor's personal property of every kind and nature and wherever located,
now owned or hereafter acquired, and the proceeds thereof, as
follows:
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(a)
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All
of Debtor's Accounts (as defined in Section 9-106 of the UCC) whether
secured or unsecured, now owned or hereafter acquired, and the proceeds
thereof (the "Accounts");
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(b)
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All
of Debtor's Instruments (as defined in Section 9-105(1)(i) of the UCC),
now owned or hereafter acquired, and the proceeds
thereof;
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(c)
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All
of Debtor's Chattel Paper (as defined in Section 9-105(1)(b) of the UCC),
now owned or hereafter acquired, and the proceeds
thereof;
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(d)
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All
of Debtor's General Intangibles (as defined in Section 9-106 of the UCC),
now owned or hereafter acquired, and the proceeds thereof (the "General
Intangibles");
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(e)
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All
of Debtor's Inventory (as defined in Section 9-109(4) of the UCC), now
owned or hereafter acquired, and the proceeds thereof (the
"Inventory");
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(f)
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All
of Debtor's Equipment (as defined in Section 9-109(2) of the UCC) and all
attachments, accessories, parts or tooling relating thereto and all
replacements for the foregoing, in each case now owned or hereafter
acquired, and the proceeds thereof (the
"Equipment");
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(g)
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All
of Debtor's Insurance with respect to the Inventory, General Intangibles,
Fixtures, Equipment and Goods against risks of fire, theft or any other
physical damage or loss, now owned or hereafter acquired, and the proceeds
thereof, and all insurance insuring the payment of Accounts, now owned or
hereafter acquired, and the proceeds
thereof;
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(h)
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All
goodwill, trade names, trademarks, trade secrets, know-how, inventions,
patents, patent applications, copyrights and other intellectual property,
now owned or hereafter acquired by Debtor, or any rights of Debtor with
respect to any of the foregoing, now owned or hereafter acquired, whether
or not any of the same are covered in other categories of this Schedule,
and the proceeds thereof;
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(i)
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All
of Debtor's Documents of Title (as defined in Section 1-201-(15) of the
UCC), now owned or hereafter acquired, and the proceeds
thereof;
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(j)
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All
of Debtor's Goods (as defined in Section 2-105(1) of the UCC), now owned
or hereafter acquired, whether or not any of the same are covered in other
categories of this Schedule, and the proceeds thereof (the
"Goods");
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(k)
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All
of Debtor's Fixtures (as described in Section 9-313 of the UCC), now owned
or hereafter acquired, and the proceeds thereof (the
"Fixtures");
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(l)
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All
of Debtor’s Investment Property (as defined in Section 9-115 of the UCC),
now owned or hereafter acquired, and all proceeds and General Intangibles
arising therefrom (the "Investment
Property");
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(m)
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All
of Debtor's right, title and interest in all of its books, records, ledger
sheets, files and other data and documents, now owned or hereafter
existing, relating to any of the items listed in Sections (a) through (k)
above;
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(n)
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All
of Debtor's rights as a seller of goods under Article 2 of the UCC with
respect to the Inventory, and as to goods represented by or securing any
of the Accounts, all of Debtor's rights therein including, without
limitation, rights of stoppage in transit, replevin and reclamation;
and
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(o)
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All
guarantees, mortgages and real or personal property leases or other
written or oral agreements or property securing or relating to any of the
items referred to above, or acquired for the purpose of securing and
enforcing any of such items; and
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(p)
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All
sums at any time standing to Debtor's credit on Secured Party's books, and
all moneys, securities and other property of Debtor at any time in Secured
Party's possession or in which Secured Party has a lien or security
interest, and all proceeds thereof.
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