PATENT SECURITY ASSIGNMENT
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This PATENT
SECURITY ASSIGNMENT ("Agreement") is made and entered into as
of the 28th day of July, 2004 between ENCAPSULATION SYSTEMS,
INC. a
Pennsylvania corporation with an address at
Building 109, Mills of Victoria,
1489 Baltimore Pike, Springfield, PA 19064
(collectively, "Assignee") and SECOND
STAGE VENTURES, INC., a Nevada corporation,
with an address c/o Gary Henrie,
Esquire, 10616 Eagle Nest Street, Las
Vegas, NV 89141 ("Assignor").
BACKGROUND
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A. Assignee, its
subsidiary, Echo RX, Inc. ("Echo"), and Assignor are
parties to a certain Asset Purchase
Agreement dated this date (the "Sale
Agreement"), pursuant to which Assignee and
Echo have agreed to sell certain
"Patents" (hereinafter defined) to Assignor
for, among other things, (1) the sum
of $2,000,000.00 payable in cash in eight
quarterly installments in the years
2005 and 2006; and (2) a Trailer Fee (as
defined in the Sale Agreement) (the
"Obligations"). Payment of the Obligations
set forth in subpart (1) of the
preceding sentence is memorialized in a
certain Promissory Note dated this date
(the "Note").
B. In order
to induce Assignee to enter into the Note, Assignor has
agreed to assign to Assignee a security
interest in certain patent rights, as
herein provided.
C. Any term used
but not defined herein shall have the meaning given
to such term in the Sale Agreement.
NOW THEREFORE,
incorporating the Background section herein, and in
consideration of the premises, and of the
mutual covenants of the parties
hereto, and intending to be legally bound
hereby, it is hereby agreed as
follows:
1. Assignment of
Patents. To secure the
complete and timely payment
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and satisfaction of all Obligations,
Assignor hereby grants, assigns and conveys
to the Assignee a security interest in and
to the patent applications and
patents of the Assignor, which are listed
in Schedule A hereto (collectively
called the "Patents"), including without
limitation, all rights owned by
Assignor corresponding thereto throughout
the world and all reissues, divisions,
continuations, renewals, extensions and
continuations-in-part and all proceeds
thereof.
2. Warranties and
Representations. The
Assignor covenants and
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warrants that the Assignor has the
unqualified right to enter into this
Agreement and perform its terms.
3. Right to
Benefits. If, before
the Obligations shall have been
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satisfied in full, the Assignor shall
obtain rights to any patentable
inventions, or become entitled to the
benefit of any patent application or
patent for any reissue, division,
continuation, renewal, extension, or
continuation-in-part of any Patent or any
improvement on any Patent, the
provisions of paragraph 1 shall
automatically apply thereto and the Assignor
shall give to the Assignee prompt written
notice thereof.
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4. Future Patents.
The Assignor
authorizes the Assignee to modify
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this Agreement by amending Schedule A to
include any future patents and patent
applications which are Patents under
paragraph 1 or paragraph 3 hereof.
5. Events of
Default. The term
"Event of Default", as used herein,
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shall mean: (a) failure to pay any Trailer Fee
within thirty (30) days after
the date on which Assignor receives written
notice from Assignee of Assignor's
failure to do so; (b) any Event of Default
under the Note; and (c) any violation
by the Assignor of any representation,
warranty or covenant contained in this
Agreement and any modification or amendment
hereof which is not waived or cured
and remedied within thirty (30) calendar
days after receipt by Assignor of
written notice thereof.
6. Assignor's Right
to Use Patents. Unless
and until an Event of
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Default shall occur and be continuing, the
Assignor shall retain the legal and
equitable title to the Patents and shall
have the right to use the Patents in
the ordinary course of its business but
shall not be permitted to sell, assign,
transfer or otherwise encumber the Patents
or any part thereof; provided,
however, that nothing herein contained
shall prohibit the Assignor from failing
to renew or otherwise abandoning any item
included within the Patents if, in the
Assignor's good judgment, the retention of
such item is not material to the
proper conduct of its business, provided,
however, that Assignor shall give the
Assignee thirty (30) days' prior written
notice of any abandonment or failure to
renew of any item included within the
Patents, and Assignor shall have the
unfettered right to take any and all steps
necessary to become the owner of such
abandoned or unrenewed Patent.
7. Assignee's
Rights As Secured Party. If any Event of Default shall
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have occurred and be continuing, the
Assignee shall have, in addition to all
other rights and remedies given it by this
Agreement and the Note, those allowed
by law and the rights and remedies of a
secured party under the Uniform
Commercial Code as enacted in any
jurisdiction in which the Patents may be
located and, without demand of performance
and without other notice (except as
set forth next below) or demand whatsoever
to the Assignor, all of which are
hereby expressly waived, and without
advertisement, sell at public or private
sale or otherwise realize upon, in Delaware
County, Pennsylvania or elsewhere,
the whole or from time to time any part of
the Patents, or any interest which
the Assignor may have therein, and after
deducting from the proceeds of sale or
other disposition of the Patents all
expenses (including all reasonable expenses
for brokers' fees and legal services),
shall apply the residue of such proceeds
toward the payment of the Obligations.
Notice of any sale or
other disposition
of the Patents shall be given to the
Assignor at least five (5) calendar days
before the time of any intended public or
private sale or other disposition of
the Patents is to be made, which the
Assignor hereby agrees shall be reasonable
notice of such sale or other disposition.
At any such sale or
other
disposition, the Assignee may, to the
extent permissible under applicable law,
purchase the whole or any part of the
Patents sold, free from any right of
redemption on the part of Assignor, which
right is hereby waived and released.
8. Power of
Attorney. If any Event
of Default shall have occurred and
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be continuing, the Assignor hereby
authorizes and empowers the Assignee to make,
constitute and
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appoint any officer or agent of the
Assignee as the Assignee may select in its
exclusive discretion, as the Assignor's
true and lawful attorney-in-fact, with
the power to endorse the Assignor's name on
all applications, documents, papers
and instruments necessary for the Assignee
to use and sell the invention
disclosed and claimed in the Patents, or to
grant or issue any exclusive or
non-exclusive license under the Patents to
any third person, or necessary for
the Assignee to assign,
