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INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL
PROPERTY SECURITY AGREEMENT (this “ Agreement
” dated as of October 19, 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
(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, 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;
(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.
(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
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:
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(i)
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such
Intellectual Property is subsisting and has not been adjudged
invalid or unenforceable, in whole or in part;
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(ii)
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such
Intellectual Property is valid and enforceable;
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(iii)
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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;
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(iv)
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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 third party;
and
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(v)
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the
Company has performed and will continue to perform all acts and has
paid all required fees and taxes to maintain each and every item of
Intellectual Property in full force and effect throughout the
world, as applicable.
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