PATENT SECURITY ASSIGNMENT --------------------------

 

                           PATENT SECURITY ASSIGNMENT

                           --------------------------

 

     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, pledge, convey or otherwise transfer title in or dispose

of the Patents to any third person. The Assignor hereby ratifies all that such

attorney shall lawfully do or cause to be done by virtue hereof. This power of

attorney shall be irrevocable for the life of this Agreement.

 

     9.