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Exhibit 10.26
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INTELLECTUAL PROPERTY SECURITY AGREEMENT
Intellectual Property Security Agreement (this "Agreement" dated
as of
June 11, 2007, by and among Paradigm Medical Industries, 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 8% Callable
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
$.001 per share
(the "Common Stock"). In connection therewith, Company shall
issue the Secured
Party certain Common Stock purchase warrants (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
(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.
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"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, 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
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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 set
forth on Schedule A attached hereto;
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(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, except as
set forth on
Schedule D. 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, except
as set forth on
Schedule D. 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 as set forth on Schedule D, 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 its Intellectual Property at the locations set
forth on Schedule
A attached hereto 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) Except as set forth on Schedule D, 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
first priority
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 A attached hereto contains a list of all of
the subsidiaries of Company.
(p) Schedule B attached hereto includes all Licenses, and
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
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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 Copyrights and Copyright
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 . Except
as set forth in
Schedule B, 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)
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