Exhibit 10.41
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "AGREEMENT" dated as
of
August 15, 2007, by and among Midnight Holdings Group, Inc., a
Delaware
corporation (the "COMPANY"), and the secured parties signatory
hereto and their
respective endorsees, transferees and assigns (collectively, the
"SECURED
PARTY").
W I T N E S S E T H :
WHEREAS, pursuant to a
Securities Purchase Agreement, dated the date
hereof, between Company and the Secured Party (the "PURCHASE
AGREEMENT"),
Company has agreed to issue to the Secured Party and the Secured
Party has
agreed to purchase from Company certain of Company's 10% Secured
Convertible
Notes, due three years from the date of issue (the "NOTES"), which
are
convertible into shares of Company's Common Stock, par value
$.00005 per share
(the "COMMON STOCK"). In connection therewith, Company shall issue
the Secured
Party certain Common Stock purchase warrants dated as of the date
hereof to
purchase the number of shares of Common Stock indicated below each
Secured
Party's name on the Purchase Agreement (the "WARRANTS"); and
WHEREAS, in order to induce the Secured Party to purchase the
Notes,
Company has agreed to execute and deliver to the Secured Party this
Agreement
for the benefit of the Secured Party and to grant to it a first
priority
security interest in certain Intellectual Property (defined below)
of Company to
secure the prompt payment, performance and discharge in full of all
of Company's
obligations under the Notes and exercise and discharge in full of
Company's
obligations under the Warrants; and
NOW,
THEREFORE, in consideration of the agreements herein contained and
for
other good and valuable consideration, the receipt and sufficiency
of which is
hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms which
are
defined in the Purchase Agreement and used herein are so used as so
defined; and
the following terms shall have the following meanings:
"SOFTWARE INTELLECTUAL PROPERTY" shall mean:
(a) all software programs (including all source code, object
code
and all related applications and data files), whether now owned,
upgraded,
enhanced, licensed or leased or hereafter acquired by the Company,
above;
(b) all computers and electronic data processing hardware and
firmware associated therewith;
(c) all documentation (including flow charts, logic diagrams,
manuals, guides and specifications) with respect to such software,
hardware and
firmware described in the preceding clauses (a) and (b); and
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(d) all rights with respect to all of the foregoing, including,
without limitation, any and all upgrades, modifications,
copyrights, licenses,
options, warranties, service contracts, program services, test
rights,
maintenance rights, support rights, improvement rights, renewal
rights and
indemnifications and substitutions, replacements, additions, or
model
conversions of any of the foregoing.
"COPYRIGHTS" shall mean (a) all copyrights, registrations and
applications for registration, ISSUED or filed, including any
reissues,
extensions or renewals thereof, by or with the United States
Copyright Office or
any similar office or agency of the United States, any state
thereof, or any
other country or political subdivision thereof, or otherwise,
including, all
rights in and to the material constituting the subject matter
thereof,
including, without limitation, any referred to in SCHEDULE B
hereto, and (b) any
rights in any material which is copyrightable or which is protected
by common
law, United States copyright laws or similar laws or any law of any
State,
including, without limitation, any thereof referred to in SCHEDULE
B hereto.
"COPYRIGHT LICENSE" shall mean any agreement, written or oral,
providing for a grant by the Company of any right in any Copyright,
including,
without limitation, any thereof referred to in SCHEDULE B
hereto.
"INTELLECTUAL PROPERTY" shall means, collectively, the Software
Intellectual Property, Copyrights, Copyright Licenses, Patents,
Patent Licenses,
Trademarks, Trademark Licenses and Trade Secrets.
"OBLIGATIONS" means all of the Company's obligations under this
Agreement and the Notes, in each case, whether now or hereafter
existing,
voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated
or unliquidated, whether or not jointly owed with others, and
whether or not
from time to time decreased or extinguished and later decreased,
created or
incurred, and all or any portion of such obligations or liabilities
that are
paid, to the extent all or any part of such payment is avoided or
recovered
directly or indirectly from the Secured Party as a preference,
fraudulent
transfer or otherwise as such obligations may be amended,
supplemented,
converted, extended or modified from time to time.
"PATENTS" shall mean (a) all letters patent of the United
States
or any other country or any political subdivision thereof, and all
reissues and
extensions thereof, including, without limitation, any thereof
referred to in
SCHEDULE B hereto, and (b) all applications for letters patent of
the United
States and all divisions, continuations and continuations-in-part
thereof or any
other country or any political subdivision, including, without
limitation, any
thereof referred to in SCHEDULE B hereto.
"PATENT LICENSE" shall mean all agreements, whether written or
oral, providing for the grant by the Company of any right to
manufacture, use or
sell any invention covered by a Patent, including, without
limitation, any
thereof referred to in SCHEDULE B hereto.
"SECURITY AGREEMENT" shall mean the a Security Agreement, dated
the date hereof between Company and the Secured Party.
"TRADEMARKS" shall mean (a) all trademarks, trade names,
corporate names, company names, business names, fictitious business
names, trade
styles, service marks,
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logos and other source or business identifiers, and the goodwill
associated
therewith, now existing or hereafter adopted or acquired, all
registrations and
recordings thereof, and all applications in connection therewith,
whether in the
United States Patent and Trademark Office or in any similar office
or agency of
the United States, any state thereof or any other country or any
political
subdivision thereof, or otherwise, including, without limitation,
any thereof
referred to in SCHEDULE B hereto, and (b) all reissues, extensions
or renewals
thereof.
"TRADEMARK LICENSE" shall mean any agreement, written or oral,
providing for the grant by the Company of any right to use any
Trademark,
including, without limitation, any thereof referred to in SCHEDULE
B hereto.
"TRADE SECRETS" shall mean common law and statutory trade
secrets
and all other confidential or proprietary or useful information and
all know-how
obtained by or used in or contemplated at any time for use in the
business of
the Company (all of the foregoing being collectively called a
"TRADE SECRET"),
whether or not such Trade Secret has been reduced to a writing or
other tangible
form, including all documents and things embodying, incorporating
or referring
in any way to such Trade Secret, all Trade Secret licenses,
including each Trade
Secret license referred to in SCHEDULE B hereto, and including the
right to sue
for and to enjoin and to collect damages for the actual or
threatened
misappropriation of any Trade Secret and for the breach or
enforcement of any
such Trade Secret license.
2.
GRANT OF SECURITY INTEREST. In accordance with Section 3(m) of
the
Security Agreement, to secure the complete and timely payment,
performance and
discharge in full, as the case may be, of all of the Obligations,
the Company
hereby, unconditionally and irrevocably, pledges, grants and
hypothecates to the
Secured Party, a continuing security interest in, a continuing
first lien upon,
an unqualified right to possession and disposition of and a right
of set-off
against, in each case to the fullest extent permitted by law, all
of the
Company's right, title and interest of whatsoever kind and nature
in and to the
Intellectual Property (the "SECURITY INTEREST").
3.
REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and
warrants, and covenants and agrees with, the Secured Party as
follows:
(a) The Company has the requisite corporate power and authority
to
enter into this Agreement and otherwise to carry out its
obligations thereunder.
The execution, delivery and performance by the Company of this
Agreement and the
filings contemplated therein have been duly authorized by all
necessary action
on the part of the Company and no further action is required by the
Company.
This Agreement constitutes a legal, valid and binding obligation of
the Company
enforceable in accordance with its terms, except as enforceability
may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws
affecting the enforcement of creditor's rights generally.
(b) The Company represents and warrants that it has no place of
business or offices where its respective books of account and
records are kept
(other than temporarily at the offices of its attorneys or
accountants) or
places where the Intellectual Property is stored or located, except
as has been
disclosed to the Secured Party;
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(c) Except as set forth on SCHEDULE 3(c), the Company is the
sole
owner of the Intellectual Property (except for non-exclusive
licenses granted by
the Company in the ordinary course of business), free and clear of
any liens,
security interests, encumbrances, rights or claims, and is fully
authorized to
grant the Security Interest in and to pledge the Intellectual
Property. There is
not on file in any governmental or regulatory authority, agency or
recording
office an effective financing statement, security agreement,
license or transfer
or any notice of any of the foregoing (other than those that have
been filed in
favor of the Secured Party pursuant to this Agreement) covering or
affecting any
of the Intellectual Property. So long as this Agreement shall be in
effect, the
Company shall not execute and shall not knowingly permit to be on
file in any
such office or agency any such financing statement or other
document or
instrument (except to the extent filed or recorded in favor of the
Secured Party
pursuant to the terms of this Agreement), except for a financing
statement
covering assets acquired by the Company after the date hereof,
provided that the
value of the Intellectual Property covered by this Agreement along
with the
Collateral (as defined in the Security Agreement) is equal to at
least 150% of
the Obligations.
(d) The Company shall at all times maintain its books of account
and
records relating to the Intellectual Property at its principal
place of business
and may not relocate such books of account and records unless it
delivers to the
Secured Party at least 30 days prior to such relocation (i) written
notice of
such relocation and the new location thereof (which must be within
the United
States) and (ii) evidence that the necessary documents have been
filed and
recorded and other steps have been taken to perfect the Security
Interest to
create in favor of the Secured Party valid, perfected and
continuing first
priority liens in the Intellectual Property to the extent they can
be perfected
through such filings.
(e) This Agreement creates in favor of the Secured Party a
valid
security interest in the Intellectual Property securing the payment
and
performance of the Obligations and, upon making the filings
required hereunder,
a perfected first priority security interest in such Intellectual
Property to
the extent that it can be perfected through such filings.
(f) Upon request of the Secured Party, the Company shall execute
and
deliver any and all agreements, instruments, documents, and papers
as the
Secured Party may request to evidence the Secured Party's security
interest in
the Intellectual Property and the goodwill and general intangibles
of the
Company relating thereto or represented thereby, and the Company
hereby appoints
the Secured Party its attorney-in-fact to execute and file all such
writings for
the foregoing purposes, all acts of such attorney being hereby
ratified and
confirmed; such power being coupled with an interest is irrevocable
until the
Obligations have been fully satisfied and are paid in full.
(g) The execution, delivery and performance of this Agreement does
not
conflict with or cause a breach or default, or an event that with
or without the
passage of time or notice, shall constitute a breach or default,
under any
agreement to which the Company is a party or by which the Company
is bound. No
consent (including, without limitation, from stock holders or
creditors of the
Company) is required for the Company to enter into and perform its
obligations
hereunder.
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(h) The Company shall at all times maintain the liens and
Security
Interest provided for hereunder as valid and perfected liens and
security
interests in the Intellectual Property to the extent they can be
perfected by
filing in favor of the Secured Party until this Agreement and the
Security
Interest hereunder shall terminate pursuant to Section 11. The
Company hereby
agrees to defend the same against any and all persons. The Company
shall
safeguard and protect all Intellectual Property for the account of
the Secured
Party. Without limiting the generality of the foregoing, the
Company shall pay
all fees, taxes and other amounts necessary to maintain the
Intellectual
Property and the Security Interest hereunder, and the Company shall
obtain and
furnish to the Secured Party from time to time, upon demand, such
releases
and/or subordinations of claims and liens which may be required to
maintain the
priority of the Security Interest hereunder.
(i) The Company will not transfer, pledge, hypothecate,
encumber,
license (except for non-exclusive licenses granted by the Company
in the
ordinary course of business), sell or otherwise dispose of any of
the
Intellectual Property without the prior written consent of the
Secured Party.
(j) The Company shall, within ten (10) days of obtaining
knowledge
thereof, advise the Secured Party promptly, in sufficient detail,
of any
substantial change in the Intellectual Property, and of the
occurrence of any
event which would have a material adverse effect on the value of
the
Intellectual Property or on the Secured Party's security interest
therein.
(k) The Company shall permit the Secured Party and its
representatives
and agents to inspect the Intellectual Property at any time, and to
make copies
of records pertaining to the Intellectual Property as may be
requested by the
Secured Party from time to time.
(l) The Company will take all steps reasonably necessary to
diligently
pursue and seek to preserve, enforce and collect any rights,
claims, causes of
action and accounts receivable in respect of the Intellectual
Property.
(m) The Company shall promptly notify the Secured Party in
sufficient
detail upon becoming aware of any attachment, garnishment,
execution or other
legal process levied against any Intellectual Property and of any
other
information received by the Company that may materially affect the
value of the
Intellectual Property, the Security Interest or the rights and
remedies of the
Secured Party hereunder.
(n) All information heretofore, herein or hereafter supplied to
the
Secured Party by or on behalf of the Company with respect to the
Intellectual
Property is accurate and complete in all material respects as of
the date
furnished.
(o) SCHEDULE 3(a) to the Purchase Agreement contains a list of all
of
the subsidiaries of Company.
(p) SCHEDULE B attached hereto includes all Patents and Patent
Licenses, if any, owned by the Company in its own name as of the
date hereof.
SCHEDULE B hereto includes all Trademarks and Trademark Licenses,
if any, owned
by the Company in its own name as of the date hereof. SCHEDULE B
hereto includes
all Copyrights and Copyright
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Licenses, if any, owned by the Company in its own name as of the
date hereof.
SCHEDULE B hereto includes all Trade Secrets and Trade Secret
Licenses, if any,
owned by the Company as of the date hereof. To the best of the
Company's
knowledge, each License, Patent, Trademark, Copyright and Trade
Secret is valid,
subsisting, unexpired, enforceable and has not been abandoned.
Except as set
forth in SCHEDULE B, none of such Licenses, Patents, Trademarks,
Copyrights and
Trade Secrets is the subject of any licensing or franchise
agreement. To the
best of the Company's knowledge, no holding, decision or judgment
has been
rendered by any Governmental Body which would limit, cancel or
question the
validity of any License, Patent, Trademark, Copyright and Trade
Secrets . No
action or proceeding is pending (i) seeking to limit, cancel or
question the
validity of any License, Patent, Trademark, Copyright or Trade
Secret, or (ii)
which, if adversely determined, would have a material adverse
effect on the
value of any License, Patent, Trademark, Copyright or Trade Secret.
The Company
has used and will continue to use for the duration of this
Agreement, proper
statutory notice in connection with its use of the Patents,
Trademarks and
Copyrights and consistent standards of quality in products leased
or sold under
the Patents, Trademarks and Copyrights.
(q) With respect to any Intellectual Property:
(i) such
Intellectual Property is subsisting and has not been
adjudged invalid or unenforceable, in whole or in part;
(ii) such
Intellectual Property is valid and enforceable;
(iii) the Company has
made all necessary filings and recordations
to protect its interest in such Intellectual Property,
including, without limitation, recordations of all of its
interests in the Patents, Patent Licenses, Trademarks and
Trademark Licenses in the United States Patent and
Trademark Office and in corresponding offices throughout
the world and its claims to the Copyrights and Copyright
Licenses in the United States Copyright Office and in
corresponding offices throughout the world;
(iv) other than
as set forth in SCHEDULE B, the Company is the
exclusive owner of the entire and unencumbered right, title
and interest in and to such Intellectual Property and no
claim has been made that the use of such Intellectual
Property infringes on the asserted rights of any
