SECURITY AGREEMENT


         This  Security  Agreement  (this  "Security   Agreement")  is  made  on
September  4,  1998,  by  Augment  Systems,  Inc.,  2  Robbins  Road,  Westford,
Massachusetts 01886-4113 ("Debtor"), in favor of the persons listed on Exhibit A
hereto  ("Lenders"),  pursuant to a Loan Agreement dated the date hereof between
Debtor  and  Lenders  (as  the  same  may  from  time  to  time  be  amended  or
supplemented,  the "Loan  Agreement"),  and certain  Promissory  Notes issued in
favor of the Lenders.

         The following is a recital of facts underlying this Security Agreement:

         A.  Debtor  is  simultaneously  with  the  execution  of this  Security
Agreement  borrowing from Lenders money (all such  borrowings  are  collectively
referred to as the  "Loan"),  which Loan is being made  through a bridge loan by
Lenders  evidenced by  promissory  notes of Debtor (the "Notes") and pursuant to
the Loan  Agreement.  All sums that are now or  hereafter  become due to Lenders
pursuant  to the terms of the Notes and the Loan  Agreement  are  referred to in
this Security Agreement as the "Debt."

         B. In order to induce  Lenders  to make the Loan,  Debtor has agreed to
grant Lenders a security interest in all "Collateral," as hereafter defined.

         NOW THEREFORE, the parties hereby agree as follows:

         1.  SECURITY  INTEREST  AND  COLLATERAL.  To secure the due payment and
performance of all indebtedness and other  liabilities and obligations,  whether
now existing or hereafter arising,  of the Debtor to the Lenders under,  arising
out of or in any way  connected  with the Loan  Agreement  and the Notes and all
instruments,  agreements and documents  executed,  issued and delivered pursuant
thereto,  including,  without limitation, this Security Agreement, and to secure
any other  obligations  of the Debtor to the  Lenders,  whether now  existing or
hereafter   arising,   all   hereinafter   referred  to   collectively   as  the
"Obligations,"  Debtor  hereby  assigns,   mortgages,   pledges,   hypothecates,
transfers  and sets over to the  Lenders  and grants to the Lenders a first lien
upon and  security  interest  in all  assets of the  Debtor,  including  without
limitation  those assets set forth,  referred to, or listed on Schedule I hereto
(all hereinafter referred to as the "Collateral").

         2. CONDITIONAL ASSIGNMENT. In addition to, and not by way of limitation
of, the grant of a security  interest in the Collateral set forth above,  Debtor
hereby, effective upon the occurrence and during the continuance of any Event of
Default, as defined herein, grants, sells, conveys, transfers,  assigns and sets
over to Lenders for Lenders' benefit all Debtor's rights,  title and interest in
and to the Collateral.

         3. SECURED CREDITOR.  Lenders shall have all the rights and remedies of
a secured creditor as provided under the Massachusetts  Uniform  Commercial Code
and any other applicable Uniform Commercial Codes, as set forth in the Notes and



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the Loan Agreement and as provided in this Security Agreement. Debtor represents
and warrants that (i) Debtor has no place of business other than as set forth at
the  beginning  of this  Agreement  or its sales  office  located  at 16885 West
Bernardo Drive, Suite 255, San Diego,  California 92127 and (ii) Debtor has used
no other name in the  operation of its business  other than  "Augment  Systems."
Debtor  agrees  that  Debtor  will  neither  (y) change its place of business or
operate its business in any place other than that set forth at the  beginning of
this  Security  Agreement  nor (z) change  its name or use or operate  under any
other name,  unless Debtor  provides to Lenders notice thereof not less than ten
(10) business days before any such change, operation or use.

         4. FINANCING STATEMENTS.  Debtor will execute such financing statements
or other documents required under the Massachusetts  Uniform Commercial Code and
any other  applicable  Uniform  Commercial Code and the United States Patent and
Trademark Office in order to enable Lenders to perfect its security  interest in
the  Collateral,  and  Debtor  will at all  times  and from  time to time at the
request of Lenders  make,  execute  and deliver  all such  additional  financing
statements and other  writings,  including  assignments,  as Lenders  reasonably
require  to more  completely  vest in and  assure  Lenders  their  rights in the
Collateral pursuant to this Security Agreement.  Debtor hereby appoints Lenders,
or any  agent of  Lenders  as  Debtor's  attorney-in-fact  with  full  power and
authority to execute any such  financing  statements  or other  writings for the
purposes set forth in this Section.

         5. BOOKS OF ACCOUNT.  Debtor will, at all  reasonable  times,  and from
time to time,  allow  Lenders  or any of their  partners,  officers,  employees,
representatives,    or   agents,    subject   to   maintenance   of   reasonable
confidentiality,  to examine and inspect and make extracts  from Debtor's  books
and other records  pertaining to the Collateral  and, where accounts or contract
rights are part of the  Collateral,  to arrange for  verification  of  accounts,
under reasonable procedures, directly with account debtors or by other methods.

         6. NO MARSHALLING OF ASSETS. Lenders shall not be obligated to take any
steps necessary to preserve their rights in any Collateral against other persons
claiming an interest therein, but may do so at Lenders' option. At their option,
Lenders may discharge any taxes, liens, security interest, or other encumbrances
to which any  Collateral  is at any time  subject  and may,  upon the failure of
Debtor  to do  so,  purchase  insurance  on  any  Collateral  and  pay  for  the
preservation  thereof,  and  Debtor  shall  reimburse  Lenders on demand for any
payments  made  or  expenses  incurred  by  Lenders  pursuant  to the  foregoing
authorization together with interest at the rate provided in the Notes.

         7. DEFAULT. Any Event of Default as defined in the Loan Agreement shall
also  constitute an "Event of Default" under this Security  Agreement.  Upon the
occurrence of any Event of Default and at any time thereafter:

            a.  Lenders may appoint an agent on their  behalf  ("Agent")  by the
vote of a majority in interest of the principal amount of Notes, which Agent may
take control of the  Collateral  and any proceeds and products of  Collateral to
which  Lenders are entitled  under this Security  Agreement or under  applicable
law. Agent shall have the right to endorse any checks, notes, contracts or other
instruments or documents on behalf of Debtor for the benefit of Lenders.


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            b. Agent may require  Debtor to assemble the  Collateral and make it
available to Lenders at a place to be  designated  by Agent which is  reasonably
convenient to the parties.

            c. Agent may notify  any  account  debtor of Debtor or obligor on an
instrument to make payment to Lenders.

            d.  Whenever   notification  with  respect  to  the  sale  or  other
disposition of Collateral is required by law, such  notification of the time and
place of public sale,  or the date after which a private sale or other  intended
disposition is to be made, shall be considered reasonable if given at least five
(5) days before the time of such event.

            e. Agent  shall be  entitled  to  recover  from  Debtor all  Agent's
expenses for  retaking,  holding,  or preparing  for sale,  selling or otherwise
disposing of the Collateral,  including,  but not limited to, Agent's reasonable
attorneys' fees and legal expenses.

            f.  Lenders may bid at any public or private  sale and may  purchase
any Collateral sold at such sale.

         8.  MAINTENANCE  OF  COLLATERAL.  Debtor  shall at all  times  keep the
Collateral within the Commonwealth of Massachusetts or State of California.  The
Company  will  keep  the  Collateral  in good  order  and  repairs,  subject  to
reasonable wear and tear, and will not use same in violation of law or policy of
insurance  thereon.  The  Company  will  maintain  with  financially  sound  and
reputable insurers insurance with respect to its properties and business against
such  casualties  and  contingencies  as shall  be in  accordance  with  general
practices of  businesses  engaged in similar  activities  in similar  geographic
areas

         9. RELEASE OF LENDERS. Upon payment of all of the Obligations,  Lenders
shall execute any and all  instruments  and documents  reasonably  necessary and
proper to discharge and release the lien on the Collateral  arising  pursuant to
this Agreement.

         10.  MISCELLANEOUS.  This Agreement may only be  terminated,  modified,
waived or amended by a written  instrument  duly  executed by Debtor and Lenders
who hold more than 50% of the principal  amount of the Notes.  All notices given
pursuant to this  Agreement  shall be in writing,  either  delivered  by hand or
first-class  mail or by  telecopier,  to the address of the parties set forth on
EXHIBIT A hereto or to such  other  address  as a party  designates  by  written
notice to the other party.  Lenders'  rights and remedies under this  Agreement,
the  Notes  and the Loan  Agreement  shall be  cumulative  and may be  exercised
separately  or  concurrently.  This  Agreement  may be assigned by Lenders,  but
Debtor shall not assign this Agreement or any rights hereunder without the prior
written consent of Lenders. This Agreement shall be governed by and construed in
accordance  with the laws of the State of New York and shall be binding upon the
successors  and  assigns of Debtor and inure to the benefit of Lenders and their
successors, assigns and endorsees. Debtor hereby irrevocably consents to the non
exclusive  jurisdiction of the Supreme Court of the State of New York, County of
New York and of the  United  States


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District Courts in the State of New York,  Southern District of New York for all
purposes in connection with any action or proceeding  arising out of or relating
to this Security  Agreement,  and further consents that any process or notice in
connection with any proceeding hereunder may be served (i) inside or outside the
State of New York by Registered or Certified Mail, Return Receipt Requested, and
service or notice so served  shall be deemed  complete  five (5) days after same
shall have been posted, or (ii) such other manner as permissible under the rules
of said Courts. Within twenty (20) days after such mailing,  Debtor shall appear
in answer to such  process  or  notice  of motion or other  application  to said
Courts,  failing  which  Debtor  shall be deemed in default and  judgment may be
entered by Lenders  against  Debtor for the amount of the claim and other relief
requested  herein.  This Agreement may be signed in counterparts,  each of which
shall be an original, but when taken together shall constitute one instrument.

         11.  USE AS  FINANCING  STATEMENT.  A  carbon,  photographic  or  other
reproduction  of this  Agreement  shall be sufficient as a financing  statement,
even though only the original hereof contains an original signature.

         IN WITNESS  WHEREOF,  the parties  have  executed  and  delivered  this
Agreement as of the date first set forth above.



                                          "Debtor"

                                          AUGMENT SYSTEMS, INC.


                                          By:___________________________________



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                                   SCHEDULE I

                                   COLLATERAL

         All of  Debtor's  rights,  title  and  interest  in,  under  and to the
following (collectively, the "Collateral"):

(A)  Accounts  Receivable,  including  (i) all of  Debtor's  present  and future
accounts,  contract rights, general intangibles,  chattel paper and instruments,
as such terms are defined in the Uniform  Commercial  Code, (ii) all of Debtor's
right, title and interest, and all of any of Debtor's rights, remedies, security
and liens, in, to and in respect of any Accounts Receivable,  including, without
limitation,   rights  of  stoppage  in  transit,   replevin,   repossession  and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party,  guaranties  or other  contracts of  suretyship  with respect to Accounts
Receivable, deposits or other security for the obligation of any account debtor,
and credit and other insurance and (iii) all of any of Debtor's right, title and
interest  in, to and in respect of all goods  relating to, or which by sale have
resulted in, Accounts  Receivable,  including,  without  limitation,  all goods,
described  in invoices or other  documents  or  instruments  with respect to, or
otherwise representing or evidencing,  any Account Receivable, and all returned,
reclaimed or repossessed goods; (B) Documents, including all instruments, files,
records,  ledger  sheets  and  documents  covering  or  relating  to  any of the
collateral;  (C)  Equipment,  including  all of Debtor's  machinery,  equipment,
vehicles that are owned by Debtor,  furniture and fixtures and all  attachments,
accessories  and  equipment  now or  hereafter  owned or  acquired  in  Debtor's
business or used in connection therewith,  and all substitutions and replacement
thereof,  wherever located,  whether now owned or hereafter  acquired by Debtor;
(D) General  Intangibles,  including all of Debtor's  present and future general
intangibles  of every kind and  description,  and the  goodwill of the  business
symbolized  thereby,  including,  without limitation,  all patents,  trademarks,
service marks,  copyrights,  web sites, and internet domain names and sites, and
Federal,  State and  local tax  refund  claims of all kinds due to  Debtor;  (E)
Inventory, including all raw materials, work in process, finished goods, and all
other inventory (as defined in the Uniform  Commercial  Code) of whatsoever kind
or nature, and all wrapping, packaging,  advertising and shipping materials, and
any documents relating thereto, and all labels and other devices, names or marks
affixed or to be affixed hereto for purposes of selling or identifying  the same
or the seller or  manufacturer  thereof  and all of  Debtor's  right,  title and
interest therein and thereto,  wherever located,  whether now owned or hereafter
acquired by debtor;  (F) Cash,  including  drafts,  acceptances,  bank deposits,
deposit accounts,  checking accounts, and cash now or hereafter owned by Debtor,
or in which  Debtor may now have or may  hereafter  acquire any interest and (G)
Proceeds, including any consideration received from the sale, exchange, license,
lease  or  other   disposition  of  any  asset  or  property  which  constitutes
Collateral,  any  value  received  as a  consequence  of the  possession  of any
Collateral  and any payment  received from any insurer or other person or entity
as a result of the destruction,  loss, theft or other involuntary  conversion of
whatever nature of any asset or property which constitutes Collateral, and shall
include,  without limitation,  all cash and negotiable  instruments  received or
held by Debtor, including,  without limitation,  cash and negotiable instruments
received or held, pursuant to any lockbox or similar arrangement relating to the
payment of Account Receivable.