INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement (this "IP Agreement") is made
as of the Effective Date by and between RapidTron, Inc., a Nevada corporation
("Grantor"), and Silicon Valley Bank, a California banking corporation ("Bank").
RECITALS
A. Bank will make advances to Grantor ("Advances") as described in the
Accounts Receivable Purchase Agreement (the "Purchase Agreement"), but only if
Grantor grants Bank a security interest in its Copyrights, Trademarks, Patents,
and Mask Works. Defined terms used but not defined herein shall have the same
meanings as in the Purchase Agreement.
B. Pursuant to the terms of the Purchase Agreement, Grantor has granted
to Bank a security interest in all of Grantor's right title and interest,
whether presently existing or hereafter acquired in, to and under all of the
Collateral.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged and intending to be legally bound, as collateral security
for the prompt and complete payment when due of Grantor's Indebtedness under the
Purchase Agreement, Grantor hereby represents, warrants, covenants and agrees as
follows:
1. Grant of Security Interest. As collateral security for the prompt
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and complete payment and performance of all of Grantor's present or future
Indebtedness, obligations and liabilities to Bank, Grantor hereby grants a
security interest in all of Grantor's right, title and interest in, to and under
its Intellectual Property Collateral (all of which shall collectively be called
the "Intellectual Property Collateral"), including, without limitation, the
following:
(a) Any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held, including without limitation those set forth on Exhibit A
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attached hereto (collectively, the "Copyrights");
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Grantor
now or hereafter existing, created, acquired or held;
(d) All patents, patent applications and like protections
including, without limitation, improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, including without
limitation the patents and patent applications set forth on Exhibit B attached
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hereto (collectively, the "Patents");
(e) Any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Grantor connected with
and symbolized by such trademarks, including without limitation those set forth
on Exhibit C attached hereto (collectively, the "Trademarks")
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(f) All mask works or similar rights available for the protection
of semiconductor chips, now owned or hereafter acquired, including, without
limitation those set forth on Exhibit D attached hereto (collectively, the
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"Mask Works");
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(g) Any and all claims for damages by way of past, present and
future infringements of any of the rights included above, with the right, but
not the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(h) All licenses or other rights to use any of the Copyrights,
Patents, Trademarks, or Mask Works and all license fees and royalties arising
from such use to the extent permitted by such license or rights; and
(i) All amendments, extensions, renewals and extensions of any of
the Copyrights, Trademarks, Patents, or Mask Works; and
(j) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
2. Authorization and Request. Grantor authorizes and requests that the
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Register of Copyrights and the Commissioner of Patents and Trademarks record
this IP Agreement.
3. Covenants and Warranties. Grantor represents, warrants, covenants
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and agrees as follows:
(a) Grantor is now the sole owner of the Intellectual Property
Collateral, except for non-exclusive licenses granted by Grantor to its
customers in the ordinary course of business.
(b) Performance of this IP Agreement does not conflict with or
result in a breach of any IP Agreement to which Grantor is bound, except to the
extent that certain intellectual property agreements prohibit the assignment of
the rights thereunder to a third party without the licensor's or other party's
consent and this IP Agreement constitutes a security interest.
(c) During the term of this IP Agreement, Grantor will not
transfer or otherwise encumber any interest in the Intellectual Property
Collateral, except for non-exclusive licenses granted by Grantor in the ordinary
course of business or as set forth in this IP Agreement;
(d) To its knowledge, each of the Patents is valid and
enforceable, and no part of the Intellectual Property Collateral has been judged
invalid or unenforceable, in whole or in part, and no claim has been made that
any part of the Intellectual Property Collateral violates the rights of any
third party;
(e) Grantor shall promptly advise Bank of any material adverse
change in the composition of the Collateral, including but not limited to any
subsequent ownership right of the Grantor in or to any Trademark, Patent,
Copyright, or Mask Work specified in this IP Agreement;
(f) Grantor shall (i) protect, defend and maintain the validity
and enforceability of the Trademarks, Patents, Copyrights, and Mask Works, (ii)
use its best efforts to detect infringements of the Trademarks, Patents,
Copyrights, and Mask Works and promptly advise Bank in writing of material
infringements detected and (iii) not allow any Trademarks, Patents, Copyrights,
or Mask Works to be abandoned, forfeited or dedicated to the public without the
written consent of Bank, which shall not be unreasonably withheld, unless
Grantor determines that reasonable business practices suggest that abandonment
is appropriate.
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(g) Grantor shall not register any Copyrights or Mask Works with
the United States Copyright Office unless it: (i) has given at least fifteen
(15) days' prior notice to Bank of its intent to register such Copyrights or
Mask Works and has provided Bank with a copy of the application it intends to
file with the United States Copyright Office (excluding exhibits thereto); (ii)
executes a security agreement or such other documents as Bank may reasonably
request in order to maintain the perfection and priority of Bank's security
interest in the Copyrights proposed to b e registered with the United States
Copyright Office; and (iii) records such security documents with the United
States Copyright Office contemporaneously with filing the Copyright
application(s) with the United States Copyright Office. Grantor shall promptly
provide to Bank a copy of the Copyright application(s) filed with the United
States Copyright Office, together with evidence of the recording of the security
documents necessary for Bank to maintain the perfection and priority of its
security interest in such Copyrights or Mask Works. Grantor shall provide
written notice to Bank of any application filed by Grantor in the United States
Patent Trademark Office for a patent or to register a trademark or service mark
within 30 days of any such filing;
(h) This IP Agreement creates, and in the case of after acquired
Intellectual Property Collateral, this IP Agreement will create at the time
Grantor first has rights in such after acquired Intellectual Property
Collateral, in favor of Bank a valid and perfected first priority security
interest in the Intellectual Property Collateral in the United States securing
the payment and performance of the obligations evidenced by the Purchase
Agreement upon making the filings referred to in clause (i) below;
(i) To its knowledge, except for, and upon, the filing with the
United States Patent and Trademark office with respect to the Patents and
Trademarks and the Register of Copyrights with respect to the Copyrights and
Mask Works necessary to perfect the security interests created hereunder and
except as has been already made or obtained, no authorization, approval or other
action by, and no notice to or filing with, any U.S. governmental authority of
U.S. regulatory body is required either (i) for the grant by Grantor of the
security interest granted hereby or for the execution, delivery or performance
of this IP Agreement by Grantor in the U.S. or (ii) for the perfection in the
United States or the exercise by Bank of its rights and remedies thereunder;
(j) All information heretofore, herein or hereafter supplied to
Bank by or on behalf of Grantor with respect to the Intellectual Property
Collateral is accurate and complete in all material respects.
(k) Grantor shall not enter into any agreement that would
materially impair or conflict with Grantor's obligations hereunder without
Bank's prior written consent, which consent shall not be unreasonably withheld.
Grantor shall not permit the inclusion in any material contract to which it
becomes a party of any provisions that could or might in any way prevent the
creation of a security interest in Grantor's rights and interest in any property
included within the definition of the Intellectual property Collateral acquired
under such contracts, except that certain contracts may contain anti-assignment
provisions that could in effect prohibit the creation of a security interest in
such contracts.
(l) Upon any executive officer of Grantor obtaining actual
knowledge thereof, Grantor will promptly notify Bank in writing of any event
that materially adversely affects the value of any material Intellectual
Property Collateral, the ability of Grantor to dispose of any material
Intellectual Property Collateral of the rights and remedies of Bank in relation
thereto, including the levy of any legal process against any of the Intellectual
Property Collateral.
4. Bank's Rights. Bank shall have the right, but not the obligation,
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to take, at Grantor's sole expense, any actions that Grantor is required under
this IP Agreement to take but which Grantor fails to take, after fifteen (15)
days' notice to Grantor. Grantor shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this section 4.
5. Inspection Rights. Grantor hereby grants to Bank and its employees,
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representatives and agents the right to visit, during reasonable hours upon
prior reasonable written notice to Grantor, and any of Grantor's plants and
facilities that manufacture, install or store products (or that have done so
during the prior six-month period) that are sold utilizing any of the
Intellectual Property Collateral, and to inspect the products
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and quality control records relating thereto upon reasonable written notice to
Grantor and as often as may be reasonably requested, but not more than one (1)
in every six (6) months; provided, however, nothing herein shall entitle Bank
access to Grantor's trade secrets and other proprietary information.
6. Further Assurances; Attorney in Fact.
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(a) On a continuing basis, Grantor will, subject to any prior
licenses, encumbrances and restrictions and prospective licenses, make, execute,
acknowledge and deliver, and file and record in the proper filing and recording
places in the United States, all such instruments, including appropriate
financing and continuation statements and collateral agreements and filings with
the United States Patent and Trademarks Office and the Register of Copyrights,
and take all such action as may reasonably be deemed necessary or advisable, or
as requested by Bank, to perfect Bank's security interest in all Copyrights,
Patents, Trademarks, and Mask Works and otherwise to carry out the intent and
purposes of this IP Agreement, or for assuring and confirming to Bank the grant
or perfection of a security interest in all Intellectual Property Collateral.
(b) Grantor hereby irrevocably appoints Bank as Grantor's
attorney-in-fact, with full authority in the place and stead of Grantor and in
the name of Grantor, Bank or otherwise, from time to time in Bank's discretion,
upon Grantor's failure or inability to do so, to take any action and to execute
any instrument which Bank may deem necessary or advisable to accomplish the
purposes of this IP Agreement, including:
(i) To modify, in its sole discretion, this IP Agreement
without first obtaining Grantor's approval of or signature to such modification
by amending Exhibit A, Exhibit B, Exhibit C, and Exhibit D hereof, as
appropriate, to include reference to any right, title or interest in any
Copyrights, Patents, Trademarks or Mask Works acquired by Grantor after the
execution hereof or to delete any reference to any right, title or interest in
any Copyrights, Patents, Trademarks, or Mask Works in which Grantor no longer
has or claims any right, title or interest; and
(ii) To file, in its sole discretion, one or more financing
or continuation statements and amendments thereto, relative to any of the
Intellectual Property Collateral without the signature of Grantor where
permitted by law.
7. Events of Default. The occurrence of any of the following shall
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constitute an Event of Default under this IP Agreement:
(a) An Event of Default occurs under the Purchase Agreement; or
(b) Grantor breaches any warranty or agreement made by Grantor in
this IP Agreement.
8. Remedies. Upon the occurrence and continuance of an Event of
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Default, Bank shall have the right to exercise all the remedies of a secured
party under the California Uniform Commercial Code, including without limitation
the right to require Grantor to assemble the Intellectual Property Collateral
and any tangible property in which Bank has a security interest and to make it
available to Bank at a place designated by Bank. Bank shall have a
nonexclusive, royalty free license to use the Copyrights, Patents, Trademarks,
and Mask Works to the extent reasonably necessary to permit Bank to exercise its
rights and remedies upon the occurrence of an Event of Default. Grantor will
pay any expenses (including reasonable attorney's fees) incurred by Bank in
connection with the exercise of any of Bank's rights hereunder, including
without limitation any expense incurred in disposing of the Intellectual
Property Collateral. All of Bank's rights and remedies with respect to the
Intellectual Property Collateral shall be cumulative.
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9. Indemnity. Grantor agrees to defend, indemnify and hold harmless
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Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this IP Agreement, and (b) all
losses or expenses in any way suffered, incurred, or paid by Bank as a result of
or in any way arising out of, following or consequential to transactions between
Bank and Grantor, whether under this IP Agreement or otherwise (including
without limitation, reasonable attorneys fees and reasonable expenses), except
for losses arising from or out of Bank's gross negligence or willful misconduct.
10. Reassignment. At such time as Grantor shall completely satisfy all
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of the obligations secured hereunder, Bank shall execute and deliver to Grantor
all deed, assignments, and other instruments as may be necessary or proper to
reinvest in Grantor full title to the property assigned hereunder, subject to
any disposition thereof which may have been made by Bank pursuant hereto.
11. Course of Dealing. No course of dealing, nor any failure to
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exercise, nor any delay in exercising any right, power or privilege hereunder
shall operate as a waiver thereof.
12. Attorneys' Fees. If any action relating to this IP Agreement is
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brought by either party hereto against the other party, the prevailing party
shall be entitled to recover reasonable attorneys' fees, costs and
disbursements.
13. Amendments. This IP Agreement may be amended only by a written
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instrument signed by both parties hereto.
14. Counterparts. This IP Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
15. Law and Jurisdiction. This IP Agreement shall be governed by and
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construed in accordance with the laws of the State of California, without regard
for choice of law provisions. Grantor and Bank consent to the nonexclusive
jurisdiction of any state or federal court located in Santa Clara County,
California.
16. Confidentiality. In handling any confidential information, Bank
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shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this IP
Agreement except that the disclosure of this information may be made (i) to the
affiliates of the Bank, (ii) to prospective transferee or purchasers of an
interest in the obligations secured hereby, provided that they have entered into
comparable confidentiality agreement in favor of Grantor and have deliver a copy
to Grantor, (iii) as required by law, regulation, rule or order, subpoena
judicial order or similar order and (iv) as may be required in connection with
the examination, audit or similar investigation of Bank.
IN WITNESS WHEREOF, the parties hereto have executed this IP Agreement on
the day and year first above written.
ADDRESS OF GRANTOR: GRANTOR:
3151 Airway Avenue, Building Q RAPIDTRON, INC., a Nevada corporation
Costa Mesa, CA 92626
By: /s/ John A. Creel
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Name: John A. Creel
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Title: CEO/President
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Exhibit "A" attached to that certain Intellectual Property Security Agreement.
EXHIBIT "A"
COPYRIGHTS
SCHEDULE A - ISSUED COPYRIGHTS
- ----------------------------------
COPYRIGHT REGISTRATION DATE OF
DESCRIPTION NUMBER ISSUANCE
- ----------- ------------ --------
SCHEDULE B - PENDING COPYRIGHT APPLICATIONS
- ------------------------------------------------
FIRST DATE
COPYRIGHT APPLICATION DATE OF DATE OF OF PUBLIC
DESCRIPTION NUMBER FILING CREATION DISTRIBUTION
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SCHEDULE C - UNREGISTERED COPYRIGHTS (Where No Copyright Application is Pending)
- --------------------------------------------------------------------------------
DATE AND
RECORDATION
NUMBER OF
IP AGREEMENT TO
OWNER OF
ORIGINAL GRANTOR (IF
AUTHOR OR ORIGINAL AUTHOR
OWNER OF OR OWNER OF
FIRST DATE COPYRIGHT COPYRIGHT IS
COPYRIGHT DATE OF OF (IF DIFFERENT DIFFERENT FROM
DESCRIPTION CREATION DISTRIBUTION FROM GRANTOR) GRANTOR )
- ----------- -------- ------------ -------------- ---------------
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Exhibit "B" attached to that certain Intellectual Property Security Agreement.
EXHIBIT "B"
PATENTS
PATENT
DESCRIPTION DOCKET NO. COUNTRY SERIAL NO. FILING DATE STATUS
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Exhibit "C" attached to that certain Intellectual Property Security Agreement.
EXHIBIT "C"
TRADEMARKS
TRADEMARK
DESCRIPTION COUNTRY SERIAL NO. REG. NO STATUS
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Exhibit "D" attached to that certain Intellectual Property Security Agreement.
EXHIBIT "D"
MASK WORKS
MASK WORK
DESCRIPTION COUNTRY SERIAL NO. REG. NO STATUS
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